Question
Oversight and Governance
A. U.S. Exchanges. Select a major U.S. exchange(s) that the company you are reviewing could have considered in making its IPO listing decision. If
the company is listed on a specific U.S. exchange, use that market. Be sure to answer:
1. What rules and regulations do companies wishing to list on this U.S. exchange need to follow and how might that affect listing decisions?
Your answer should focus on basic entry and operation standards, including requirements for non-U.S. companies to trade on U.S.
exchanges, citing relevant sources.
2. How are U.S. market regulations enforced and by which agencies? How might the costs of compliance and consequences of noncompliance
have affected the company’s listing decision? Justify your response.
B. International Exchanges. Select a major non-U.S. exchange(s) that the company you selected could have considered in making its IPO listing
decision. If the company is listed on a specific non-U.S. exchange, use that market. Specifically:
1. How can you determine the rules, regulations, and oversight bodies for this non-U.S. market? In other words, where would you look to
find this information and how would you know to look there? Support your response with concrete examples.
2. What rules and regulations do companies wishing to list on this non-U.S. exchange need to follow and how is compliance enforced? How
might those factors have affected the company’s decision? Your answer should focus on how basic market requirements and compliance
mechanisms are (or are not) different than those for U.S. exchanges, citing relevant sources.
C. Multiple Markets. Analyze whether the selected company should or should not have considered listing its initial public offering (IPO) in more
than one market. Justify your response. For example, can a company legally list in more than one market? If so, under what conditions? What are
the risks and returns for attracting individual and corporate investors?
D. Interest. Analyze how interest rate policies and announcements affect returns and decisions about listing in the two markets you selected.
Provide specific examples to illustrate your answer. For example, how are interest rates determined in U.S. versus non-U.S. markets? How do
governments use interest rate decisions to try to influence the markets under different conditions?
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Subject | Law and governance | Pages | 2 | Style | APA |
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Answer
IPO Listing Decisions: Case of PRA Health Science Inc.
For fast-growing companies, they are faced with numerous decisions, one of them being the decision on where it is supposed to be listed. There are unique characteristics that are depicted by each stock exchange in the United States, and survival is made possible through having a clear understanding of each of the exchanges. PRA Health Science Inc. is a company of focus in this analysis. A company needs to understand the type of exchange that is most suitable for its set of practices.
A. U.S Exchanges
There are numerous stock markets in the United Sates where stock sellers have a possibility of meeting with stock buyers. The markets offer a range of exchanges that include New York Stock Exchange (NYSE), American Stock Exchange (ASE) and Chicago Stock Exchange (CHX) (Macey & O'Hara, 2002). PRA Health Science Inc. is listed on NYSE. Different requirements are to be met by companies that need to be listed on NYSE.
For a company to be listed on NYSE, its shareholder’s equity is supposed to be at $4 million for standards 1, 2, and 3 respectively. Standard 4 shareholder equity is not applicable. The pre-tax income that is required for the previous year is supposed to be at $750,000, which is only applicable for standard 1. The amount of pre-tax income can also be applicable for two of the most recent three fiscal years. The market value of public float is supposed to be at $3 million for standard 1, $15 million for both standards 2 and 3, and $20 million for standard 4. There is consideration for a number of shareholders holding 200 shares in a company (Macey & O'Hara, 2002). There is also a consideration on the number of publicly held shares on the market.
Regulation of U.S markets is made possible through penalties that include a combination of strategies that are initiated in the market. Among the penalties include time in prison and imposing hefty fines on those who break regulations, which are stringent. The Securities and Exchange Commission (SEC) has the responsibility of correcting some of the irregularities that emanate from the market (Lo, Wang, & Liao, 2006). The SEC is an independent agency in the United States responsible for enforcing a variety of regulations affecting the security laws, and making sure all participants in a market are in a position to carry out business operations by following already set rules and regulations.
B. International Exchanges
An example of in exchange that is found outside the United States is Alpha Exchange Inc. that operates in Canada. It is an alternative that could have been explored by PRA Health Science Inc. There are sources that can be used on non US markets a good example being reading SEC filings. The filings represent annual reports, quarterly reports and 8-K that depict Current Event. Information can also be sourced from company websites detailing relevant investor information. Analysts are also sources of information on such regulation agencies in non US markets, a good example being stock brokers.
C. Multiple Markets
Investors are in a position to make choice of different markets from which they can buy or invest their shares (Lo, Wang, & Liao, 2006). PRA Health Science Inc. needs to explore the possibility of dual listing because it is associated with numerous benefits. Certain global exchanges can be found to be conducive to the company by bearing in mind the nature of activities it is supposed to undertake. There is also a decrease in the bid-ask spread where there is a consideration for dual listing which means that investors are in a better position to buy as well as sell their shares during any time that they view appropriate. For PRA Health Science Inc. to be in a position to go through dual listing, it is required that it satisfies all the requirements for dual listing. For example, it will be required that PRA Health Science Inc. be listed on an exchange that is approved by ASEC as a “like” exchange. The company will not be required to file a prospectus as well as go through normal filling process.
D. Interest
A change in interest rates which is brought about by changes in the rate at the Federal Reserve Board (FRB) will positively or negatively affect exchange markets in the U.S. Investors will always invest in those options that assure them of highest returns in the market (Chemmanur & Fulghieri, 2006). A rise or decrease in the degree of interest rates will also have an effect on business and consumer psychology. Federal funds rates that are currently in place have a great impact on how investors are willing to make their investment decisions. The interest rates in the US are, for example, determined by Federal Open Market Committee while in non US markets, they are determined by existing forces of money supply and demand.
Increase in interest rates globally will have an effect on increasing the level of volatility in the market. Investors will be less willing to invest in such markets as they are not assured of the highest rate of returns in the market. There can be addition to the QE programs to stabilize such markets.
Conclusion
Companies are in a position to exploit different options in an effort for them to raise revenue, one of the options being through the use of stock exchange markets. The markets that are to be used include both those within the US and those outside the US. PRA Health Science Inc. represents one of the companies in the US which can exploit various available options to remain highly competitive.
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