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Raising Capital in Switzerland On October 3,

2000, E-centives, incorpo- rated in the United States, made an ini- tial public offering on the Swiss Stock Exchange's New Market. The company raised approximately US$40 million. E-centive's offering circular stated that no offers or sales of the company's com- mon stock would be made in the United States, and that there would be no pub- lic market for the common stock in the United States after the offering. The Swiss Exchange's New Market The Swiss Exchange launched the New Market in 1999. The New Market is designed to meet the financing needs of rapidly growing companies from Switzerland and abroad. It provides firms with a simplified means of entry to the Swiss capital markets. Listing requirements for the New Market are simple. For exam- ple, companies must have an operating track record of 12 months, the initial public listing must involve a capital increase, and to ensure market liquidity, a bank must agree to make a market in the securities. E-centives E-centives, Inc. is a leading online direct marketing infrastructure company. The company offers systems and technologies that enable businesses to build large, rich databases of consumer profiles and inter- ests. In return, consumers receive a free personalized service that provides them with promotional offers based on their interests. At the time of the public offering, E-centives maintained over 4.4 million e-centives online accounts for members. The company does not charge members a fee for its service. Instead, the company generates revenue primarily from mar- keters whose marketing matter is deli- vered to targeted groups of E-centives members. E-centives currently employs more than 100 people in its Bethesda, Maryland headquarters, and its offices in Redwood City, New York, and Los Angeles. As of the offering date, the com- pany had little revenue and had not been profitable. Revenue for the year-ended December 31, 1999, was US$740,000, with a net loss of about US$16 million. As of June 30, 2000, the company had an accu- mulated deficit of about US$39 million. E-centives' growth strategy is to expand internationally. To date, the company has focused on pursuing opportunities in the United States. E-centives intends to expand into Europe and other countries. The company is currently considering expanding into Switzerland, the United Kingdom, and Germany.19 Required 1. Refer to Exhibit 1-8, which lists fac- tors relevant for choosing an over- seas market for listing or raising capital. Which factors might have been relevant in E-centives' decision to raise capital and list on the Swiss Exchange's New Market?

2. Why do you believe E-centives chose not to raise public equity in the United States? What are the potential drawbacks related to E-centives' decision not to raise capital in the U.S. public markets?

3. What are the advantages and dis- advantages to E-centives of using U.S. GAAP?

4. Should the SWX Swiss Exchange require E-centives to prepare its financial statements using Swiss accounting standards?

5. Learn more about the New Market at the SWX Swiss Exchange's Web site ( What are the listing requirements for the New Market? What are the financial reporting requirements? Does E-centives appear to fit the profile of the typical New Market company?

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