How to avoid the four common pitfalls of cross-border IPOs

2. Failing to foster cross-cultural collaboration

Cross-border listings require strong cross-border communication. The more seamlessly you can coordinate with the local regulatory bodies, stock exchange, bankers or underwriters, lawyers, and potential investors, the better your odds of a successful cross-border listing. 

Flexibility is key; teams and advisors will need to meet tight deadlines while balancing time zones, holiday schedules, cultures and approaches. Due diligence is also a priority, particularly for the data security of confidential information and to ensure all regulatory bases are covered. 

3. Underestimating the complexities of international listing regulations

One of the first things companies considering a cross-border IPO must contemplate is the differences in regulations, procedures, and auditing rules. Increasingly complex and ever-changing international regulations require deep knowledge, but also flexibility to shift as requirements often do. Falling foul of these can be an exceedingly costly mistake, so due diligence is critical.

A clear and in-depth understanding of local regulations and listing requirements together with a clear understanding of the differences and comparative requirements is essential, especially if the overall environmental and culture are significantly different.

In the cross-border listing referenced earlier, the client faced differences in regulations, accounting standards and reporting dates, with two sets of regulators and specialist lawyers involved to iron out any legal and operational requirements. In this case, the EY team collaborated with the Asian and European regulators on the creation of a suite of new regulatory rules that would allow the client to list back in its European home country. 

4. Misjudging financial implications

Ahead of any listing, your company’s internal structures, such as legal, tax, organizational, units, management, accounting, and Investor Relations (IR) must be checked and prepared for the relevant requirements in the local market. 

Cross-border transactions also mean managing currency risks, so it is important to build in hedging strategies and backup plans. Similarly, understanding the tax implications is key to maximizing tax efficiency of any deal.

Clarifying complexity

Cross-border IPOs offer significant appeal for businesses. In Q3 2023 alone, they generated US$6.5b in proceeds, with US exchanges particularly attractive for foreign issuers. Indeed, the two largest Americas IPOs in Q1 2024 were cross-border deals by foreign issuers. However, failure to navigate the complexities involved in cross-border listings could end up costing you more than you bargained for. Market fit, cultural considerations and tax and regulatory frameworks can jeopardize the success of a listing if not carefully planned for. 

By understanding these potential pitfalls, you can plan your capital market strategy to maximize the upside.