US inventory market beats Europe on new listings

People clap as the closing bell rings at the New York Stock Exchange.

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The United States is more attractive than European exchanges for new listings and there’s not much Europeans can do to change that, analysts told CNBC.

British chip designer Arm, owned by Japan soft bank, announced earlier this month that it plans to go public in the US later this year. This is despite intense lobbying by UK officials to persuade the company to debut in the UK

building materials giant CRHwhich is headquartered in Ireland, also said it would move its primary listing to the US, citing “increased commercial, operational and acquisition opportunities”.

Both examples show how attractive the US stock market is for the corporate world.

Roger Jones, head of equities at London and Capital, told CNBC there are two main reasons for this.

“Sellers or listeners can get better prices in the US, which is still trading at significantly higher valuations than Europe. Second, many of the favored sectors and also industries that are immature companies looking to enter the market are big US companies sectors like technology, bio/medtech and communications companies,” he said.

Northvolt, a battery manufacturer from Sweden, is still in the start-up phase but plans to go public in the future. CEO Peter Carlsson told CNBC in February that he was considering a dual listing, one in Sweden and one in the US

“I would definitely see that as an opportunity in the long term,” he said.

In 2022, there were 130 new IPOs in the US, raising about $9 billion, according to EY data. Almost 70% of these IPOs took place on US exchanges.

Adding to the higher valuations, Caroline Simmons, UK Chief Investment Officer at UBS, emphasized that the US offers scale that European exchanges don’t.

She dubbed it the “clustering” effect — stressing how it’s easier to attract investment when you’re in the same environment as other companies within the same sector. That’s why tech companies like Arm are looking for new listings in the US, given how many other tech companies are also listed there.

Simmons also said “there is no structural reason” why Europe cannot attract the same level of quotations. “But it comes back to the mass argument,” she added, and therefore there’s not much the continent can do about it.

SoftBank aims to raise $8 billion in chipmaker Arm's US IPO in 2023

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