Overview

This chapter explores in greater detail, two of the issues introduced in the previous chapter.

First, should a company extend its marketing effort outside its home market? Going international adds to the cost and complexity of the IPO, but delivers clear benefits. Companies have long offered shares outside their home market. For example, North and South American railroads would never have been built were it not for the funds raised from European investors in the 19th century. However, the phenomenon of international offerings where a company offers shares domestically and internationally simultaneously, is relatively new. Most observers date the first international offerings to late 1983, when UBS led European tranches for secondary offerings by two large Canadian companies, Bell Canada and Alcan.

International equity offerings received a significant boost the following year from the UK Government's privatization of British Telecom. Shares were offered in simultaneous public offers in the UK, Canada and the USA. BT shares were also distributed to investors in the rest of Europe and the Middle East. The Government took the decision to launch an international offering because it believed that the UK equity market was too small to absorb such a large issue without seriously affecting the price the Government received.

Second, what price-setting mechanism will be used: bookbuilding, fixed price or an auction? In some countries the choice is dictated by local regulators or business practice. In other countries issuers have a choice. Most international deals use bookbuilding. We will examine the procedures...