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In 2000, an American company E-incentives made an initial public offering on the Swiss Stock Exchange’s New Market (Meek & Choi, 2014). There were several factors on which such a decision depended. The main goal of this paper is to discuss and analyze these factors.
To begin with, it is important to discuss the “extent of interest in a company shown by financial analysts and investors who normally participate in a market” (Meek & Choi, 2014, p. 19). The company offers services for businesses that are necessary to develop databases of client profiles and interests. In 2000, the main company’s investors were MacAndrews & Forbes, J & W Seligman, Moore Capital, and [email protected], and the total investments of these companies were approximately $24 million (“Investors,” n.d.). Therefore, E-incentives arouses medium interest among the leading investors on the market.
The next important factor is the level of the stock exchange (Meek & Choi, 2014). Higher trading volumes were crucial for potential buyers. Markets in this industry acted very quickly because trading the venue’s technologies had become highly demanded (Meek & Choi, 2014). Therefore, the intense activity of companies working in this area attracted stock buyers. Capital market’s infrastructure providers made up a bigger segment of financial services revenues (Meek & Choi, 2014). It means that information technology was one of the leading industries at the time.
Another relevant aspect is barriers to raising capital (Meek & Choi, 2014). There were several challenges to enter the Swiss market. First, the market was quality-conscious and high-tech (“Chapter 1,” n.d.). Second, this country was a center of international competition. However, the Swiss market offered various opportunities as well. It was considered a gateway to other European markets. Also, it provided a perfect platform for the distribution of American high-tech products.
The next factor is the availability of capital in the market, which is the ability to convert assets into funds (“Capital availability,” n.d.). This factor is crucial for authorizing transactions. Different banking instruments facilitated such processes in Switzerland (Defferrard, Winzap, & Niedermann, 2016). The country’s government promoted specific regulations that ensured high capital availability.
Another important aspect is the credibility of the company as it directly influences the exchange (Meek & Choi, 2014). However, the company was well-known. E-incentives was established in 1996 and very soon built strong relationships with various Internet companies such as Excite, ZDNet, iVillage, USAToday (“E-incentives announces Swiss IPO,” n.d.) Also, the company collaborated with different marketers. E-incentives had a reputation of a company that provided excellent services to promote various products for target populations.
The next factor is the extent to which the company needs to improve its profile and brand awareness in the market (Meek & Choi, 2014). E-incentives was the first company from the United States that wanted to list on the Swiss New Market. It planned “an initial public offering of 3.7 million shares priced at $11 per share” (“E-incentives announces Swiss IPO,” n.d., para. 1). Taking into account a relatively small size of this market, the company intended to become one of the leading players in this region.
The extent to which the regulations and language in the target market are similar to these aspects in the company’s home market is also pertinent to the case (Meek & Choi, 2014). Switzerland is a unique state that has several official languages, though English is not one of them. However, the United States is one of the main partners of the country in all aspects. Also, the USA is one of the main export partners of Switzerland (“Swiss – U.S. relations,” n.d.). Although the marketing environment in Switzerland was very unusual for E-incentives, the long history of relations between the two countries contributed to the success of the venture.
Another relevant factor is the extent to which “institutional investors face statutory or self-imposed restrictions on the proportion of their investment portfolio that they can hold in securities of foreign companies” (Meek & Choi, 2014, p. 19). It was not the most serious issue in this case. Such restrictions in Switzerland were governed by the Swiss Investment Schemes Act and the Swiss Collective Investment Schemes Ordinance (Whittaker & Roth, 2014). Two regimes were applied to qualified and non-qualified investors. Strict eligibility criteria were imposed on Swiss investors. However, such restrictions were easy to overcome as there were well-developed procedures that facilitated these processes.
The next aspect is the nature and activities of investors in the target market. Switzerland is one of the major investment regions (Meek & Choi, 2014). Most investors in the country used exchange-traded funds. These funds helped to buy a wide range of assets in single security (Kuepper, 2018). Another important tool was American Depository Receipts that allowed investors to buy stocks trading on U.S. exchanges. Finally, one of the most popular options was Switzerland’s major stock exchange.
The last two factors referred to the requirements for mergers and acquisitions in the country and the demand for locally listed shares that were necessary for employee stock option plans (Meek & Choi, 2014, p. 19). The first issue was not relevant. Foreign companies had no restrictions regarding such operations (Gerhard, Appenzeller, & Hasler, 2017). However, the need for locally listed shares was very high. Most listed and private companies in Switzerland developed share plans for employees (Sommer & Wyss, 2017). Therefore, this factor was also pertinent to this case.
The most important aspects included the marketing environment and the company’s motivation and experience. All the above-discussed issues formed favorable conditions for E-incentives to enter the Swiss stock market. The success of this move determined the future ventures of the company.
Chapter 1: Doing business in Switzerland. (n.d.). Web.
Capital availability. (n.d.). Web.
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Defferrard, L., Winzap, M., & Niedermann, G. (2016). Venture capital investment in Switzerland: market and regulatory overview. Web.
E-centives announces Swiss IPO. (n.d.) Web.
Gerhard, F., Appenzeller, H., & Hasler, D. (2017). Public acquisitions in Switzerland: Overview. Web.
Investors. (n.d.). Web.
Kuepper, J. (2018). How to invest in Switzerland. Web.
Meek, G., & Choi, F., (2014). International accounting (7th ed.). Harlow, England: Pearson.
Sommer, U., & Wyss, W. (2017). Employee share plans in Switzerland: Regulatory overview. Web.
Whittaker, S., & Roth, S. (2014). New Swiss rules on distribution of Funds. Web.