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Better The Devil You Know? Cross Border IPOs

Access to liquidity is the driving force behind stock launches but going public remains a huge step for any company. It opens the management and accounts to new regulatory demands alongside the prying eyes of shareholders.

Despite this inherent risk, there are some adventurous boardrooms that prefer an even bigger leap. IB Insider looks at the ambitious world of cross-border IPOs, exporting a company’s launch to an entire new area of the world.

Photo: Markus Spiske

Opting to list in a foreign market, ushering in changes to the structure and entire geographic identity of a company, is not for the faint hearted. Why risk a move abroad when the company has a strong record and history at home?

Cross-listing done right, with home and abroad singing in harmony, can bring substantial perks. A different exchange can be home to investors with specialist industry knowledge and greater liquidity to invest.

The exchange itself may provide improved prestige, brand awareness, and ambition helping a company break into new markets. Enough to flatter even the most ardent-home birds.

Leaving home is still by no means a popular choice though. Cross border IPOs rarely exceed more than 20% of annual activity on the markets, with most companies preferring to stick to what they know. Those that opt for an exchange abroad must judge a plethora of options to find the market which offers them the best opportunities for success.

For the markets, attracting large foreign IPOs is serious business. The ‘battle of the exchanges’ is beginning to heat up with competing markets employing innovative approaches to lure ‘unicorns’ (a privately held company with a value of over $1bn looking to launch) looking for greener grass.

Source: EY

United States

The US has been the traditional home of cross-border IPOs. The prestige surrounding the market, high liquidity, and access to cheap capital have long been structural advantages for the NASDAQ and NYSE.

In 2020, North American cross-border activity grew 28 per cent in volume compared to 2019, and raised USD 25 billion, a 120 per cent increase from 2019.

One reason for the popularity of the US as a listing destination is the permissibility of dual-class share structures, something more restricted in other global exchanges.

A dual-class share structure enables a company to issue various types of shares that come with differentiated voting rights, providing an opportunity to raise capital without giving away significant power to new shareholders.

In 2014, Chinese tech giant Alibaba turned to listing on the NYSE after its dual-class share structure was frowned upon by the capital market regulators in its preferred Hong Kong market.

Many global exchanges have since followed the US’s lead; in 2018 the Hong Kong and Singapore stock exchanges revised their listing rules within months of each other to permit the listing of companies with dual class or weighted voting right shares.


China has launched significant efforts to entice foreigners to invest in the local stock market, the second largest in the world, with the end goal of catching up to the NASDAQ. In the midst of the US-China trade war of 2018, China announced the formation of the Shanghai STAR market, a stock exchange dedicated to science and technology.

Its official launch in 2019 has seen sizzling gains, with the amount of foreign investment within the STAR market surging from 270 million yuan at the end of 2019 to 5.64 billion yuan at the end of November 2020.

However, regulatory uncertainty, laborious bureaucracy and capital market controls make China an elusive market for foreign companies. China’s business ecosystem is a complex maze of cross-ownerships with layers of government affiliation at the centre of it.

Foreign companies that wish to succeed in China must find a stable position within the system, and the difficulty is only compounded by a lack of publicly accessible information.

There is still cause for trying though – the massive growth rates of the Chinese market, especially compared to its Western counterparts, remain extremely appealing.


London remains a leading international listing venue. The London Stock Exchange (LSE) thrives on its diversity, playing host to the largest proportion of international companies amongst the top exchanges.

For companies, the exchange offers a great opportunity to diversify its investor base, with UK investors only making up about half of the shareholder register, compared to close to 90 per cent for investors in major US markets.

Recently the LSE moved to consolidate listings from China via the Shanghai-London Stock Connect. The mechanism allows companies listed on one exchange to apply to sell shares on the other, designed to deepen economic and financial ties between the UK and China.

However, this scheme is not immune to political instability; after the UK government’s criticism of China’s crackdown in Hong Kong, there were rumours that the Stock Connect had been suspended.

The LSE faces other challenges as well, not least the impact of Brexit. After failure to reach a deal on financial services, the sector has been operating under a de facto no-deal scenario. Working according to this anticipated outcome has mitigated the disruption, but EU share trading has diminished significantly as a result.

The challenges for a greater share of the action by Frankfurt, Paris, and Amsterdam are likely to grow the longer the divergence continues.

In the business of playing games – Playtika’s cross-border IPO

Photo: Brendan McDermid / Reuters

To see the challenges that remain when transplanting from exchange to another, one needs look no further than the case of Playtika, a leading developer of mobile apps focussing chiefly on casino-based games.

Founded in Israel in 2010, Playtika was acquired by ambitious Chinese entrepreneur Shi Yuzhu in 2016 for $4.4 billion. Following the takeover, Shi Yuzhu earmarked moving into China’s A-share market via a merger with gaming company Giant Network as a priority.

For Playtika, China was ripe with opportunities for improved market access, brand recognition, and higher valuation. For Yuzhu, integrating Playtika and Giant would consolidate his hold over the gaming market.

However, the plan faced immediate resistance, as Beijing has long taken a dim view of all types of gambling, criminalising most gambling activity. Playtika plead the case for exception based on the ambiguity of their game mechanics, relying on in-app purchases rather than gambling with real money for revenue.

It was not enough to persuade regulators to ignore its slots and poker titles, games that in their essence encourage gambling. As a result, Yuhzu’s plan was dogged with setback – three years and three failed attempts to sell to Giant Network followed.

A calculated gamble from Yuhzu? Image: Playtika

Yuzhu and Playtika re-emerged in 2021 with a Plan-B, escaping regulators with a cross-border IPO on the US NASDAQ. On its debut, the IPO raised $1.88 billion, the largest in Israeli history.

Shares closed 17% up at $31.62, giving the company a market value of about $13 billion – above American competitor Zynga, which is worth $10.7 billion. A bittersweet success for Yuzhu no doubt, as he gave up on long held plans for even greater success in China.

Playtika’s IPO showed how the road to launch is often punctuated by shareholder ambition, politics, and regulation. In this case, the Chinese market’s opportunity of higher valuation, increased brand awareness, and growth opportunities ended up being stymied by Beijing’s strict gambling regulations.

On the other hand, the US and NASDAQ became the cross-border cure to Playtika’s problems, offering access to investor capital and a lower regulatory bar, culminating in the successful IPO.

Playtika exemplifies the difficulties companies can face when listing abroad. Making the decision involves timing, skill, luck, and considerable risk; but the right choice brings high payoffs with it.

As global exchanges continue to compete for foreign listings, the market for cross border IPOs looks set to stay as exciting as ever.

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