Why do Non-U.S. Investors buy Reg-S stock?
1) Discounted Purchase Price*. Investors typically buy Reg-S securities of U.S. companies at a slight discount from the primary U.S. public market. This discount compensates the buyer for the risks associated with the mandatory one-year restriction from resale of the stock to U.S. investors or thru U.S. securities markets (known as the “Distribution Compliance Period”). Issuers will also discount Reg-S stock because they have saved the registration costs and do not have the time delays associated with a US offering and SEC registration. *The discount spread to the corresponding U.S. market price typically will disappear as the Reg-S issue approaches the end of its 12-month requirement to remain outside of the U.S. marketplace. 2) Tax advantages. Capital Gains rates in non-U.S. countries typically encourage a holding period of a minimum of one year, by taxing short-term (less than one year) gains at prohibitively high rates. Therefore, the one-year “distribution compliance period’ requi
