Where to Go Public: Switzerland or the U.S.? These 5 Aspects Are Crucial

The costs of an IPO are quite a bit lower in Switzerland than in the U.S. In Switzerland, the size of listing and maintenance fees depends on a company’s market capitalization, whereas in the U.S. it is determined by the number of shares outstanding. This difference can be substantial particularly for smaller-sized companies.

The underwriting fee, which typically is the biggest cost item in an IPO, amounts to approximately 2% to 5% of the gross IPO proceeds in Switzerland, but totals around 3.5% to 7% in the U.S. Costs for legal and tax advice in the U.S. are likewise substantially higher for a Swiss company because it needs to hire at least one American and one Swiss law firm, which means that at least four law firms must be involved (and paid).

Every sixth IPO on U.S. stock exchanges between 2010 and 2019 was subject of legal disputes and faced a high risk of class action litigation. This risk arises as soon as a company presents documents to prospective investors prior to an IPO. Any inaccurate information or omissions in those documents could lead to a lawsuit. While individuals involved in the drafting of documents for IPOs in Switzerland can likewise be held liable for inaccuracies or omissions, plaintiffs must meet higher requirements for a liability claim to be successful in Switzerland. Moreover, class actions, which can be costly, are not permitted under Swiss law.

Case example: Snap Inc., known for its instant messaging app Snapchat, was confronted with a class action lawsuit because the company allegedly had not sufficiently informed potential investors about the competition from Instagram before the IPO. Ultimately, a settlement of 187.5 million U.S. dollars was negotiated. 

The year 2021 was a record-breaking one for U.S. stock exchanges as they hosted over 1,000 IPOs, followed by a good 180 in 2022 and 154 in 2023. Despite the sharp decline in the last two years, the IPO frequency in the U.S. remains high compared to that in Switzerland, which registers just a handful of IPOs per year. The U.S. market is thus a great deal larger, but this in turn means that many IPOs – particularly stock-market debuts by smaller-sized companies – get lost in the crowd. Consequently, it is harder for a company listed in the U.S. to stand out from the crowd, which accordingly makes it more challenging to compete for capital.

Access to an international circle of investors exists in both countries. The U.S. capital market is considered the world’s largest and most liquid one. The investor base there is accordingly large and diverse. However, Switzerland shouldn’t be underrated on this point as well. Switzerland offers access not only to a well-capitalized set of Swiss investors, but also to many international investors seeking to invest in one of the world’s most stable and trustworthy currencies: the Swiss Franc. Moreover, many U.S. investors are invested in Switzerland. A 2019 study by the State Secretariat for Economic Affairs (SECO) revealed that around 35% of the known voting rights in the constituent companies of the SMI Expanded at that time were held by U.S. investors.

IPOs on U.S. stock exchanges are subject to U.S. securities laws and regulations and must comply with the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. Prior to an IPO, a company is required to submit a registration statement to the U.S. Securities and Exchange Commission (SEC) and must provide potential investors with a prospectus within the meaning of the Securities Act. Switzerland-based companies are normally classified as “foreign private issuers” in the U.S. and therefore are required to file the registration statement with the SEC on Form F-1, which is typically a long process during which many marketing activities are prohibited. In addition, the SEC typically makes numerous comments on the draft registration statement that must be addressed by the filing company’s management. In Switzerland, in contrast, commenting on a prospectus within the meaning of the Swiss Federal Act on Financial Services (FinSA) is limited by law to assessing only completeness, the absence of inconsistencies, and understandability.

The U.S. lures companies under certain circumstances with the prospect of higher valuations. This has prompted a variety of European companies in recent years to go public in the U.S. Whoever wants to go public, regardless of where, should make that decision strategically while carefully weighing the benefits and risk