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' requiring the stock to be kept out of the U.S. marketplace is typically not a concern to the non-U.S. investor.
3) U.S. Investment. The availability of Reg-S stock issues gives the non-U.S. investor greater choices in their purchase of stock issues in U.S. public companies.
Why do Companies issue stock via Regulation S filings?
Accessing new capital. The ability to access new Foreign Capital Markets and Investors is the main attraction to U.S. issuers under Regulation S.
Advertising of Offering. Issuers are allowed to advertise a Regulation S stock offering, unlike typical private 505 or 506 private placements done with U.S Investors.
Low cost, ease of issuance. No specific information requirements for filing (unlike registered offerings or private placements such as 505 and 506) means ease of filing, low cost to Issuer. This can compare to $500,000 to $1,000,000 cost for an SEC registered offering, involving very strict, complex, time consuming SEC regulations.
In fact no special notification of any kind is required, to the S.E.C. or any other Governing Body, by a Reg S qualified Issuer. Regulation S stock issuances/transactions are reported with the quarterly '10Q' filing required by the S.E.C.