|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
London's Freewheeling Exchange; It's Winning The Listings War Against New York, But Investors Can Get Burned
David Henry
BusinessWeek. November 27, 2006
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EXCERPT: So far this year, the LSE, along with its aim market geared toward smaller companies, has lured dozens of initial public offerings away from the NYSE and NASDAQ, long the most sought-after stock markets in the world. It's done that in part by offering companies easier terms for listing and maintaining their shares. Whereas companies listed in New York are subject to the rigors of the Sarbanes-Oxley Act and other relatively strict standards, the London exchange relies almost exclusively on disclosure. But just because London's listings are soaring doesn't mean it's doing a better job of raising capital. All major stock markets have weak companies, but the new issues in London these days seem especially so. "This is the worst dreck I've ever seen," the renowned short-seller James Chanos of Kynikos Associates declared recently in a New York speech. Chanos, who has sounded alarms about U.S. companies such as Tyco, (TYC ) Conseco (CNO ), and Enron over a 25-year career, now maintains a London office and research staff to short-sell lse issues. To be sure, dependable companies like BP, HSBC (HBC ) Holdings, and GlaxoSmithKline (GSK ) still dominate London, one of the oldest and most developed centers of capitalism in the world. But when half a dozen stocks of online gambling companies plummeted recently, London's easier standards were cast in an unflattering light. The biggest loss in stock value came from online casino operator PartyGaming, one of the lse's biggest offerings in five years when it listed in June, 2005. Investors forked over $1.9 billion, all of which went to PartyGaming's founders instead of the company itself. (In U.S. deals, insiders take only about 15% of an initial public offering's proceeds, if any.) PartyGaming is owned mainly by an American couple who live in Gibraltar. Operating PartyPoker.com from computers in a Native American territory in Canada, the company was getting nearly 90% of its revenue from U.S. residents, where online gambling was and remains illegal. PartyGaming noted as much in its prospectus. And it added that its directors "take comfort...in an apparent unwillingness or inability" of authorities to enforce the law. That changed on Oct. 13, when the U.S. outlawed money transfers to offshore gambling sites, finally giving some teeth to its prohibition on Internet betting. Shares of PartyGaming and several other online casinos, all listed in London during the past two years, plunged. |
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