Without much fanfare, the American Stock Exchange has achieved remarkable success over the past two years in attracting new listings, especially from foreign issuers.
Between 2002 and 2003, Amex attracted 77% more new listings than in the previous year, compared with a fall in new listings of 36% at the New York Stock Exchange. New listings on Nasdaq were unchanged.
So far this year, Amex has attracted 74 new listings, while NYSE has listed 91, and Nasdaq 110. But Amex has succeeded in attracting 13 foreign listings so far this year, the same as Nasdaq and more than the 8 that listed on the NYSE.
Although Amex has a few large-cap names – such as British American Tobacco, with a market capitalization of $30.5 billion; and Imperial Oil, with a market cap of $15.8 billion – the exchange has proved most popular with small-cap and mid-cap companies. A large part of its success has come from assiduous courting of Canadian smaller companies seeking a secondary listing.
Since 2002, Amex has been the exchange of choice for Canadian companies seeking secondary listings abroad, outstripping Nasdaq and London's junior market, Aim. In 2003, 16 Canadian companies, mainly mining companies, listed on Amex, compared with five on Nasdaq and six on Aim.
Amex has been capitalizing on the complacency and indifference towards smaller companies of US competitors by offering a much cheaper deal and innovative services.
Initial listing fees on Amex are as little as 11.6% of those charged by NYSE and 17.5% of Nasdaq's, although the Nasdaq Small Cap market does charge less for the first 1 million shares. Annual fees too are much lower than all but the Nasdaq Small Cap market. Amex charges between $15,000 and $30,000 a year compared with between $35,000 and $500,000 on NYSE and $21,225 to $60,000 on Nasdaq.
“What we offer is very different from New York or Nasdaq,” says John McGonegal, senior vice-president of equities at Amex. “Our offering is really focused on small and mid caps. If you're a smaller company on NYSE you may not get the same level of service. Every company on Amex gets a relationship manager, which you wouldn't get at the NYSE unless you were a big company,” he says.
As part of its drive to attract new listings Amex also offers an innovative investor relations service that includes an audit of a company's current IR practices and an extensive database of investment managers, buy-side contacts, sell-side analysts, and analyst ratings.
“At many small and mid-cap companies, the CEO tends to manage all the investor relations work,” says McGonegal. “The idea behind our IR service is to help take some of that strain off,” he says.
“For a junior company it's always a struggle to find new investors,” says Bill Cavalluzzo, vice-president, investor relations, at Rubicon Minerals, a C$85 million (US$68 million) Canadian mining company that listed on Amex last month. “An Amex listing opens up new capital markets to us and makes it easier for some of our existing shareholders to buy and sell our shares. I'm not even sure if we'd qualify for the NYSE.”
Having established its reputation with Canadian issuers, Amex is now setting its sights on Europe. Although it has proved itself an attractive destination, its biggest challenge will be to convince small and mid-cap companies that they need a secondary listing at all.
“The only instance where it makes real sense is maybe where there are few comps [comparative companies] in Europe so to get a fair valuation you need to go to the US,” says an equity capital markets banker in Europe. “The US has a much bigger retail base – but how much do they really own of small and mid-cap European stocks?”
The extra regulatory burdens imposed by the Sarbanes-Oxley legislation could also prove a turn-off for some European companies, especially continental ones.