Which argument do you support

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Should Firms That Go Public Engage in International Offerings?

Point Yes. When a U.S. firm issues stock to the public for the first time in an initial public offering (IPO), it is naturally concerned about whether it can place all of its shares at a reasonable price. It will be able to issue its stock at a higher price by attracting more investors. It will increase its demand by spreading the stock across countries. The higher the price at which it can issue stock, the lower is its cost of using equity capital. It can also establish a global name by spreading stock across countries.

Counter-Point No. If a U.S. firm spreads its stock across different countries at the time of the IPO, there will be less publicly traded stock in the United States. Thus, it will not have as much liquidity in the secondary market. Investor's desire stocks that they can easily sell in the secondary market, which means that they require that the stocks have liquidity. To the extent that a firm reduces its liquidity in the United States by spreading its stock across countries, it may not attract sufficient U.S. demand for the stock. Thus, its efforts to create global name recognition may reduce its name recognition in the United States.

Who Is Correct? Use the Internet to learn more about this issue. Which argument do you support? Offer your own opinion on this issue.

Reference no: EM131117229

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