ARE YOU ALREADY LISTED ON ANOTHER STOCK MARKET?

Your corporation’s shares are a powerful product that your company can market to the world and will serve as an entrée into international markets both for capital and commercial activity.  Therefore, why limit yourself to just one capital market?  Discover where, when, and why cross-listing otherwise known as inter-listing can be beneficial to companies and in some cases can be more trouble than its worth.  Inter-listing whether on the Australian Stock Exchange (“ASX”), New York Stock Exchange (“NYSE”), or the Nasdaq is a decision that has to be carefully weighted.   In addition, we also discuss if you should be cross-listed in Canada and the US.

Cross-Listings, Inter-listings, NYSE, Nasdaq, ASX

Cross-Listing on a Canadian Stock Exchange

Are you listed on the:

London Stock Exchange
NYSE Euronext
Tel Aviv Stock Exchange
Johannesburg Stock Exchange
Catalist Market
Alternate Investment Market
OTC Markets
Australian Stock Exchange
Singapore Stock Exchange

We invite you to consider listing in Canada as an additional market for your shares. We can ensure an easy transition that is both cost-efficient and timely, will increase your shareholder base and open up a substantial new capital pool. In addition, it will also give your products/services exposure into a mature consumer market, as well as provide a natural gateway to the consumer market in the United States.

Publicly listed companies have raised billions of dollars on Canadian Stock Exchanges. For instance, a cross-listing can offer value for money, trading advantages, and a substantial increase in market awareness.

For companies listed on international exchanges as mentioned above, without a presence in Canada or the US, a cross-listing across significant times zones can be beneficial to the company and its shareholders.

With regards to companies that have a quotation on OTCMarkets, who cannot meet the listing requirements of the NYSE or NASDAQ, a listing on a Canadian exchange can strengthen their offering to investors not only in Canada but also in the US. In conclusion, by having an ‘anchor’ listing on a regulated stock exchange along with the OTC Markets quotation the company shows stronger governance with the added stock exchange regulation.

Benefits of Cross-Listing your Company in Canada

Financial Gains

LOWER COST OF CAPITAL

Through an inter-listing on a Canadian exchange, your company can lower its cost of capital by reaching more investors.

As a result, this broader reach will reduce the market risk premium because of the higher level of investor diversification amplified on a stock exchange.

SECONDARY MARKET FOR ACQUISITIONS

By establishing an anchor listing in Canada, you are able to benefit from a secondary market of your shares in Canada that can be used for North American acquisitions, as well as, improve retention and potential recruitment of North American managers and employees.

Trading

LIQUIDITY

A cross-listing will contribute to share value by providing liquidity to Canadian investors and increasing exposure to the Canadian capital markets of your shares.

TRADING VOLUME

Through a cross-listing an increase in total trading volume and market depth will emerge for your company’s shares.

PRICE DISCOVERY

In addition, an advantage of a cross-listing in Canada is that it facilitates the process of assessing share value at the beginning of a trading session in two different markets in two different times zone. For instance, at the opening of trading on both the Canadian exchange and your ‘home exchange’ prices will be less volatile for your shares as a result of being traded on two exchanges.

Market Awareness

INCREASED SHAREHOLDER BASE

A cross-listing will bring your shares closer to Canadian investors as it increases investor awareness, corporate visibility, and information flow across North America. For instance, this will also allow the market to make faster, more accurate decisions.

INVESTOR/CUSTOMER RECOGNITION

Your company can generate increased investor and customer recognition with a cross-listing.  Furthermore, a cross-listing will increase media coverage for investors and potential customers as well as boost the number of analysts covering your stock which tends to improve the accuracy of earnings forecasts.  Additionally, with the expanded investor base the demand for the shares will rise.

BONDING EFFECT

As Canada has a high investor protection rating at 7.7(¹), by bonding with the Canadian market through an anchor listing in Canada, your company will be able to show the market that its regulatory disclosure has been reviewed by two additional regulatory agencies– specifically the securities commission in Canada and the exchange, therefore, re-enforcing the company’s commitment to investor protection.

Cross-Listing and Canadian Listed Companies

Should I inter-list my Canadian stock exchange listed company?   The answer is yes and no, depending on the situation.

All Canadian stock exchanges are qualified exchanges for the OTC Markets and approved trading venues for the Frankfurt Stock Exchange (“FSE”).   As a result, it is fairly easy to have your securities quoted on these two markets.

A FSE quotation will enable your company to provide access to investors in Europe in their time zone.   Similarly, a quotation on OTCMarkets will enable easier access for US investors to purchase your stock.

Keep in mind these are not stock exchange listings but quotations on their trading system.   In the end, you will benefit from having an anchor listing on a Canadian stock exchange with trading access in the US and Europe.

For cross-listing on another exchange you have need to look at not only the benefits of inter-listing but also the disadvantages.

Let us look at the current status of Canadian inter-listed stocks.  For instance, the TSX and TSXV have 262 cross-listed companies.

230 companies on the TSX are cross-listed with the remaining 32 cross-listed companies on the TSXV.

Where are they cross-listed?

 

Exchange
AIM
ASX
BVC (Columbia)
HKSE (Hong Kong)
JSE
BVL (Peru)
LSE
Nasdaq
Nasdaq Nordic
NYSE
NYSE American
NZSE (New Zealand)
Oslo Bors
SSEV (Chile)
Total Cross-listed
14
18
1
2
3
11
6
49
9
96
41
1
1
7
TSX
3
13
1
2
1
3
5
46
7
95
39

1
TSXV
11
5


2
8
1
3
2
1
2
1

7
Sectors
All in mining or oil & gas
All in mining or oil & gas
Oil & gas
Mining
Mining
Mining
4 mining, 1 oil & gas, 1 closed-end fund
4 mining, 21 life sciences, 9 technology, 6 clean tech, rest in real estate, financial services and oil & gas
5 mining, 3 oil & gas, 1 clean technology
27 mining, 9 oil & gas, 5 utilities, 2 real estate, 5 life sciences, 14 industrial products & services, 5 consumer services, 6 communications & media, 4 clean technology, 9 financial services
36 mining, 3 oil & gas, 1 life sciences, 1 industrial products & services
Mining
Oil & gas
Mining
These companies cross-list for many different reasons such mining companies listing in the country where their property or properties are located.  Moreover, some companies want to attract mining and oil & gas investors other regions of the world such as in Europe (AIM, LSE) and the Pacific (HKSE, ASX).

Cross-listing on the NASDASQ or NYSE

Many Canadian companies view listing on the NYSE and Nasdaq as the ultimate goal in terms of listing venue. However, is it beneficial to be listed on a Canadian and US Exchange? Again, it depends on your situation.

Let us look at some of the key points:

Access

Firstly, all Canadian investors and Canadian investment dealers including online brokerages have access to trade Nasdaq and NYSE listed securities.

Costs

Secondly, being inter-listed on two exchanges in the same trading time zone and geographic region creates additional costs such as:

  • On going listing fees for two exchanges.
  • Related costs associated with following regulation of two exchanges.
  • And in many cases ongoing costs associated with following two securities laws regimes.

Diluted Liquidity

Thirdly and most importantly, you will dilute your liquidity by trading on two exchanges in the same time zone with the same trading hours.

Moreover, when you list on an exchange in Canada your securities are also traded on ATS’ and dark exchanges. For instance, by cross-listing in the US you add more ATS’ and dark exchanges. In an ideal world growth companies should only be traded on one lit market which concentrates the company’s liquidity to one market which has been researched and stated by Nasdaq’s Chief Economist.   In other words, by cross-listing on two North American exchanges you spread your trading through numerous platforms, and it is wise to try to limit that. As a result, you will have stronger liquidity and a more robust share spread.

What about RBC, BCE, Rogers? They are cross-listed in Canada and the US. This is true but there is a reason for this. Similarly, 88 other companies are cross-listed in Canada and the US. However, the one thing they have in common is that they are all companies that are part of the TSX/S&P Composite index. As a result, index funds in Canada must buy their shares.

Conclusion

In conclusion, if you complete a cross-listing on a US exchange, in most cases, it would be prudent have a single listing on NYSE or Nasdaq to avoid additional on-going costs and dilution of your liquidity.    Alternatively, for Canadian listed companies an OTCMarkets quotation is a must to enable easier trading of your securities by US investors.  In the end, an inter-listing outside of North America in the Asia-Pacific Region or in Europe could be very beneficial depending on your companies business and whether you can attract an investment dealer registered those jurisdictions.

Reach out to us by filling out the form to the right for a discussion on how a cross-listing in Canada will be a benefit for your equity listing.

(1) Source: World Bank Doing Business Guide