Monday, December 25, 2006
Hong Kong?
Hong Kong?
Hong Kong moved ahead of the US in IPOs this year but still second to London as the most popular country for IPOs.
IPOs are Initial Public Offerings in a stock that is set to trade freely on the boards. Formerly institution or privately owned, these companies sell themselves to raise capital to continue or grow their business. Almost any large company you can name today is traded on the exchanges and at one time went through the IPO process.
IPOs are known for making Americans rich during the tech boom at the turn of the millennium. Tech stocks would IPO and gain several hundred percent in one day. These stocks were all thought to be “the next Microsoft” and investors bought based on possibility rather than probability. The vast majority of these offerings had balance sheets in the red and lackluster growth but to investors on the boards they were played as lottery tickets. One win could cover the loss on hundreds of other investments.
IPOs were the goldmine for investors with access to online brokerages, which were just becoming hot on the scene. Investors could now buy and sell within the same day, even the same hour with low commission costs. IPOs were set to flourish not only because of the capital available for investment but also the newfound ease of investing online.
Due to strict laws and regulations in the United States; Hong Kong is quickly becoming a place to escape the harsh governments and regulatory organizations such as the SEC. Hong Kong has enough legalities in place to prevent fraud but not enough to where it puts a strain on legit businesses. In the US, new accounting laws stemming from frauds such as Enron threaten even the most honest of companies. Compliance to these laws demands more personnel and more money spent.
This is just another prime example of globalization today. New banking techniques and advanced computers allow for capital to be moved around the world in just seconds. I can now invest in a company in Hong Kong just as easily as I could in the states or possibly even easier because of looser laws. Hong Kong has it right, favor the corporations and the investors will follow. The new markets in Hong Kong will soon become a factor in the global economy.