There's Been a Further Decline in U.S. Capital Market Competitiveness

Wondering why capital markets jobs seem so scarce? This could be one reason. The Committee on Capital Markets Regulation (CCMR), an independent and non-partisan research organization, says U.S. Capital Markets suffered a setback in the second quarter, reversing an upward trend in Q1 of 2012.

"Despite the promising first quarter data, foreign companies have continued to avoid U.S. markets when raising capital outside their home markets," said Hal S. Scott, Director of the Committee, in a statement. This demonstrated what he called "a clear preference for non-U.S. financial centers."

Lowest Level Since 2008

Of the global initial equity offerings conducted outside a company's home market, only 6.7 percent of the volume is raised in the U.S. equity markets. While this measure had reached 17 percent through the first quarter of this year, the current decline illustrates a continuation of a four-year downward trend. U.S. share of this volume has reached its lowest level since 2008 and remains well below its historical average of 28.7 percent (1996-2006).

Preferred to Use Private Equity Rule 144A

U.S. public equity markets fared particularly poorly as foreign companies that choose to raise equity capital in the U.S. through initial offerings overwhelmingly decided to do so in the private markets via Rule 144A offerings. Of the total volume of foreign equity issued as initial offerings in the U.S. during the second quarter, 90.5 percent was conducted through private Rule 144A offerings rather than public offerings.

Not only is this a substantial increase over the 82.5 percent seen in the prior year (2011), but this figure is also far greater than the historical average of 64.1 percent (1996-2006), indicating a strong aversion to U.S. public equity markets for initial offerings. Foreign issuers' preference for the 144A private market over public equity markets demonstrates continuing weakness in the competitiveness of U.S. public markets.