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Telekom Austria, Vernalis Plan to Delist From U.S. Exchanges

European companies are already signaling their intent to take advantage of a pending change in rules that will let them easily cancel U.S. stock listings and escape the regulatory constraints of the Securities and Exchange Commission and the Sarbanes-Oxley Act.

Telekom Austria AG and Vernalis PLC, a small Great Britain-based pharmaceuticals company, Tuesday said they plan to delist and deregister from U.S. markets when the rules change on June 4, saying the cost of listing outweighs any benefit. Earlier this month, European staffing giant Adecco SA announced similar plans.

Telekom Austria is listed on the New York Stock Exchange; Vernalis trades on Nasdaq. Both also trade in their respective home countries.

The moves come as U.S. financial officials, including Treasury Secretary Henry Paulson, grapple with what they see as the shrinking competitiveness of U.S. financial markets. Other stock exchanges, particularly in London and Hong Kong, are winning initial public offerings that previously might have gone to the NYSE or Nasdaq.

Yahoo!Finance: European Cos. Exit U.S. Exchanges

Since the days of America’s first Treasury secretary, Alexander Hamilton, New York’s financial markets have driven and sustained the nation’s economy. And for the last century, companies worldwide that sought to raise capital overwhelmingly came to the United States.

Sadly, and distressingly, that era may be coming to an end, as companies looking for money on the public markets are increasingly going to Europe or Asia. In 2005, initial public offerings of stock in Europe surpassed those in America — in both number and dollar volume. Even as the American IPO market improved in 2006, that trend accelerated: According to PricewaterhouseCoopers, there were 651 IPOs in Europe last year, versus 224 in the U.S., and the European offerings raised almost $40 billion more dollars. China’s markets, with fewer IPOs, raised 30 percent more capital than those in the United States.

WashingtonPost.com: Are U.S. IPOs DOA?

A surge of mergers and acquisitions has reshaped the Silicon Valley landscape at the same time that fewer companies are launching initial public offerings.

Is that bad? At least one prominent investment banker thinks so, saying those trends could spell trouble for the region.

Paul Deninger, vice chairman of investment bank Jeffries & Company in Boston, believes that Silicon Valley is unwittingly sabotaging itself by “snatching up acquisition checks” rather than growing companies into big-league businesses.

Fewer stand-alone public companies translates into fewer challengers to incumbents, he argues, and that may hamper innovation. “The reason that oil and automotive industries operate the way they do is that there aren’t any real challengers to their ways of doing business. The same is becoming true of Silicon Valley companies (that buy promising technologies); they’re buying up smaller outfits before they become more serious threats.”

San Jose Mercury: Mergers & acquisitions: Valley’s shift from IPO to M&A

Attempts to overturn portions of Sarbanes-Oxley may pick up steam this week after an April 4 report showed the value of European stock markets has overtaken U.S. markets for the first time since World War I.

The seismic shift in the value of equity markets is a further blow to the New York Stock Exchange and other U.S. markets, which have seen some of the larger initial public offerings opt for overseas markets instead of their traditional NYSE home.

Critics of SarbOx blame the recent regulation for pushing the IPOs abroad. They claim the legislation makes compliance in the U.S. too costly.

When the new Congress begins its session this week, two familiar faces will not be present: Senator Paul Sarbanes and Representative Michael Oxley, who are both retiring. Their main legacy will be the joint attack on corporate corruption that bears their names — the Sarbanes-Oxley Act of 2002.

The act, which was passed hastily in the wake of the Enron scandal, was surely well intentioned. But it has proven counterproductive in the extreme, and Congress would best honor the departing lawmakers by repealing it. Sarbanes-Oxley has seriously harmed American corporations and financial markets without increasing investor confidence.

The section of the law requiring companies to perform internal audits has turned out to be far more costly than proponents projected, especially for smaller firms. These costs have led some small companies to go private — hardly a victory for public oversight — and some foreign firms to withdraw their stocks from American exchanges.

In addition, the average “listing premium” — the benefit that companies receive by listing their stocks on American exchanges — has declined by 19 percentage points since 2002. This explains why the percentage of worldwide initial public offerings on our exchanges dropped to 5 percent last year, from 50 percent in 2000.

iht: Enron’s last victim: American markets