Essay on Case 1-1 E-Centives, Inc.—Raising Capital in Switzerland

894 Words Jul 20th, 2012 4 Pages
Case 1-1 E-Centives, Inc.—Raising Capital in Switzerland

1. Possible factors (from Exhibit 1-7) relevant in e-centives decision to raise capital and list on the Swiss Exchange s New Market: a. Ease of raising capital (point 3). The Swiss Exchange s New Market has simple listing requirements designed to appeal to small companies. The contrast with the complex, detailed listing and reporting requirements in the United States is striking. b. Availability of capital (point 4). Switzerland has a large, well-developed capital market. c. Reputation of the exchange (point 5). The Swiss Exchange is well known for providing a high quality, efficient trading environment. d. Corporate profile and brand
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listing. (Your authors believe that such reasoning is far-fetched, but it’s not unknown.)

Possible drawbacks to not raising capital in the U.S. public markets. a. Lack of access to the largest pool of investment capital in the world. b. Lack of following by U.S. investment analysts, and lack of access to individual U.S. investors. c. Trading volume on the Swiss Exchange New Market is much smaller than on the U.S. exchanges. d. Listing in Switzerland does little to establish the reputation or raise the profile of e-centives in the United States. e. The degree to which (mostly European) investors in the New Market would be interested in a struggling U.S. start-up certainly can be questioned.

3. Advantages and disadvantages to e-centives of using U.S. GAAP. Advantages: U.S. accounting standards are highly credible and well known, which is important to a new company seeking investment capital, and would be much more familiar to the company’s management, outside auditors, and investors domiciled in the United States than any other set of standards. Use of U.S. GAAP would eliminate some suspicions of the company trying to put something over on investors by using some other set of GAAP, and U.S. GAAP is accepted explicitly by the Swiss Exchange.

Disadvantages: U.S.

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