The U.S. stock market keeps beating Europe in new listings. And it’s no fluke

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

British chip designer Arm, owned by Japan’s Softbank, announced earlier this month it was seeking to list in the U.S. this year. This is despite an intense lobbying effort from British officials to see the company make its market debut in the U.K.

Building materials giant CRH, which is headquartered in Ireland, also said it would move its primary listing to the U.S., citing “increased commercial, operational and acquisition opportunities.”

Both examples highlight how the U.S. stock market is more attractive to the corporate world.

Roger Jones, head of equities at London and Capital, told CNBC there are two main reasons why this is the case.

“Sellers or listers can get better prices in the U.S. which still trades on significantly higher valuations than Europe. Secondly, a lot of the favoured sectors, and also industries which have been more immature companies that are looking to come to market, are big U.S. sectors e.g. Technology, Bio/Med Tech and Communication companies,” he said.

Northvolt, a battery maker company out of Sweden, is still in the start-up phase but it has plans to list in the future. CEO Peter Carlsson told CNBC in February that he is considering a dual listing, one in Sweden and one in the U.S.

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

In 2022, there were 130 deals stateside in new Initial Public Offerings, which raised about $9 billion, according to data from EY. Almost 70% of these IPOs were on U.S. exchanges.

On top of higher valuations, Caroline Simmons, U.K. chief investment officer at UBS, highlighted that the U.S. offers scale in a way that European exchanges do not.

She called it the “clustering” effect — highlighting how it is easier to get investment when you are in the same space as other companies within the same sector. Hence why tech companies like Arm look at the U.S. for new listings given how many other tech firms are also listed there.

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