If, like me, you have a little stock chart on your browser screen, you’ll notice a lot of zeroes
next to the DASTY symbol. No reason to panic. Dassault Systèmes (DS) stopped trading on
the Nasdaq as of today, October 16, 2008. That’s not a surprise: the company announced
the change months ago, citing the costs of maintaining compliance with US reporting
requirements and outreach to what amounts to very few shareholders. Officially, DS filed a
form 25 with the SEC a few weeks ago, which says that it wants to voluntarily withdraw its
shares from listing and registration on the Nasdaq and a form 15F today to officially
deregister and so that it no longer has to file paperwork compliant with US regulatory
DS does intend to maintain its American Depository Receipt (ADR) program, which will
enable investors to retain their ADRs and trade them on the U.S. Over-The-Counter (OTC)
On its last earnings call, DS said that it will continue reporting results according to U.S.
GAAP for the third and fourth quarters of 2008. But starting with Q1 2009, it will report
according to the IFRS — the International Finance Reporting Standards. The Standards are
as exciting to read as the US FASB publications but serve the same end: to make
statements from different entities conform to similar standards of understandability,
relevance, reliability and comparability. The IFRS does have some quirks. As of January 1,
2009, a ‘balance sheet’ will become ‘statement of financial position’, an ‘income statement’
will be a ‘statement of comprehensive income’ — but the lowly ‘cash flow statement’ stays
pretty much the same, becoming ‘statement of cash flows’.
But the interesting element here is the relative decline of the importance of the Nasdaq. Back
in the 1990s and early 200s (even after the dot-com bubble burst), the Nasdaq was the
exchange for technology companies. Or companies that weren’t really tech-based but
wanted to be seen as hip. It used to be true that all companies wanted to be listed on the
New York Stock Exchange (NYSE) as a signal that they had "arrived"; this shifted in the
1990s as companies flew to the "hipper" Nasdaq. Even MSC.Software, a tech company if
ever there was one, moved from the more "staid" NYSE to the Nasdaq a few years ago.
In the case of DS, the company went public in 1996 in both Paris and on the NASDAQ. In
the intervening years, the international share markets have really strengthened, highlighted
by the growth in the number of companies choosing to list on the Euronext instead of or in
addition to the Nasdaq. Since US investors have access to many international markets
(through brokers like Merrill Lynch or directly via online trading), they can trade on many
markets not available 10 years ago.
So will this move hurt DS? Not likely. Investors currently owning ADRs that were previously
traded on the Nasdaq can still trade them on the US over-the-counter (OTC) market.
Customers, partners and others (like analysts) can gain all of the information they need
about DS’ finances from the IFRS-based releases. Employees? A good question. Tax
accountants will undoubtedly be able to answer questions arising from stock-based
compensation in European shares — but the shares can still be awarded (and will go up and
down in value) just as if they were traded on the Nasdaq.
An interesting tidbit in the 15F highlights the relative insignificance of DS’ share volume on
the US market. In the 12 month period ending August 31, 2008, an average of 17,909 shares
were traded in the US out of a total of 527,987 shares. That’s less than 4%. According to DS
on its last earnings call, complying with US regs and doing roadshows and the like for US
investors cost the company about 1 million Euro/year. Clearly the actual volume traded didn’t
warrant the costs involved, and the caché of the Nasdaq seems tarnished, too.
The delisting clearly makes sense.
[Note: I do not own shares in DS or any other PLM company.]