Covington Co. is a large U.S.-based MNC with large subsidiaries in France. It has issued stock...

Covington Co. is a large U.S.-based MNC with large subsidiaries in France. It has issued stock in France in order to establish its business. It could have issued stock in the U.S. and then used the proceeds in order to support the growth in Europe.

What is a possible advantage of issuing the stock in France to finance French operations?
Why might the French investors prefer to purchase the stock that was issued in France rather than purchase the stock of Covington on a U.S. stock exchange?

Expert Solution

Advantages of issuance of the stock in France to finance French operations is that it will have a better market reach in France and it will increase the business reputation in France and it will also have advantage in form of cost cutting by issuance of shares in French economy and it will also have advantage in form of cutting down off the exchange rate fluctuations to a large extent by being listed into the France economy.

French investors will be preparing to purchase the stock that was issued in France because it will have a lower regulation and avoidance of securities and exchange commission along with there will be a most beneficial elimination of risk related to exchange rate fluctuation because when there will be direct listing in France, it will mean that investors can purchase and sale in French currency but when they would have purchased in American currency,then they would have the additional risk of conversion of their realisations in different currencies so it will mean that it will completely eliminate the risk related to exchange rate conversion.

jeff jeffy answered 2 years ago

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