What Is a Dual Listing?
A dual listing refers to a listing of any security on two or more different exchanges. Companies use dual listings because of their benefits, which include additional liquidity, increased access to capital, and the ability for their shares to trade for longer periods if the exchanges on which their shares are listed are in different time zones.
Some exchanges have a number of listing categories for companies that seek a dual listing, each with different requirements and benefits.
Key Takeaways
- A dual listing is the listing of any security on two or more exchanges.
- The main advantage of a dual listing is the access to additional capital and increased liquidity.
- A popular way for non-U.S. companies to dual list in the U.S. is by using ADRs, or American Depository Receipts.
- Considering exchange rates and other complications, stock prices should remain the same on both exchanges. If not, an arbiter will bring them together.
- Some companies find it difficult to monitor their share trading in two markets simultaneously and may need to initiate separate marketing and investor-relations plans.
How a Dual Listing Works
A dual listing, also known as interlisting or cross-listing, is attractive to many non-U.S. companies because of the depth of thecapital marketsin the U.S., the world’s biggest economy.
Companies tend to list in countries that have a similar culture or share a common language with their native jurisdiction. For example, most of the biggest Canadian companies are also listed on U.S. exchanges.
A foreign company may seek an ordinary listing, the most prestigious type of listing, on an exchange such as theNYSEorNASDAQ, but the requirements to do so are stringent.
In addition to meeting the exchange’s listing criteria, the foreign company also has to satisfy U.S. regulatory requirements, restate its financials, and arrange for clearing and settlement of its trades.
A popular form of dual listing for many leading non-U.S. companies is through American Depositary Receipts (ADRs). An ADR represents the foreign shares of the company held in trust by acustodian bankin the company’s home country and carries the same rights of the shares.
Note that the stock price of a dual-listed company should be approximately the same in both jurisdictions, after taking currency differences and transaction costs into account.
Otherwise,arbitrageurswould step in and exploit the price differences. That said, price divergences do occur from time to time, especially when trading hours do not overlap and there has been a significant price move in one market.
Advantages and Disadvantages of a Dual Listing
There are numerous advantages of a dual listing. Companies get access to a larger pool of potential investors, which can be beneficial for investors as well.
For example, many Australian and Canadian resource companies list their shares on European exchanges because of substantial investor interest, partly due to the relative paucity of local resource companies.
A dual listing improves a company’s share liquidity and its public profile because the shares trade on more than one market. A dual listing also enables a company to diversify its capital-raising activities, rather than being reliant only on its domestic market.
Among the drawbacks is that dual listing is expensive due to the costs involved in the initial listing and ongoing listing expenses. Differing regulatory and accounting standards may also necessitate the need for additional legal and finance staff.
A dual listing could place more demands on management as well, given the additional time required to communicate with investors in the second jurisdiction throughroadshows, for example.
How Does a Dual Listing Affect a Company's Share Price?
A dual listing does not affect a company's share price. After taking into consideration transaction costs and exchange rates, a company's share price should be the same on both exchanges and not impacted in any way. Over the long term; however, it is possible that a company with strong financials and business outlook can benefit from a dual listing by having more liquidity and greater access to capital, which could improve the share price.
What Is the Difference Between a Dual Listing and a Secondary Listing?
A dual listing primarily relates to listings on two or more exchanges when the exchanges differ greatly, particularly in regards to geography and requirements. A secondary listing is when the requirements and geography of the different exchanges hone more closely to one another.
What Are Some Companies With Dual Listings?
Companies with dual listings include Investec, Unilever, Carnival, and Rio Tinto.
FAQs
A dual listing also enables a company to diversify its capital-raising activities, rather than being reliant only on its domestic market. Among the drawbacks is that dual listing is expensive due to the costs involved in the initial listing and ongoing listing expenses.
What are the risks of dual listing? ›
exchange Rate and currency Risk: Dual listing exposes companies to exchange rate and currency risks. Fluctuations in exchange rates can impact a company's financial performance, especially if it generates revenue in one currency but reports financial results in another.
Why would a company dual list? ›
But the main reason for having a dual-listing is to raise more money. Ultimately most companies list on a stock exchange because they want to raise cash that they can use to expand.
What is an example of dual listing? ›
Barrick Gold is an example of a dual-listed company. Barrick Gold is a Canadian gold mining company that has its stocks listed on both the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE). It trades under the ticker ABS on the TSX and under the ticker GOLD on the NYSE.
What are advantages disadvantages of cross-listing? ›
The advantages of listing of a foreign exchange include greater exposure, opportunities in foreign markets that might otherwise be unattainable, and higher profits. The disadvantages are much the same as in the setup; recurring foreign taxes, trade margin fluctuations, and other foreign trade barriers.
What are the pros and cons of dual share structure? ›
Proponents of dual-class shares say they allow founders to pursue a long-term vision, rather than face pressure to focus on short-term results. Detractors say dual-class shares creates an entrenched class of shareholder. These share holders are free to make bad decisions with few consequences.
Is dual listing good? ›
Companies may opt for dual listing for different benefits, such as better access to capital, higher liquidity, and the ability to raise additional capital. Businesses can get more trading time if the exchanges where their shares trade are located in distinct time zones.
What are the disadvantages of listing? ›
The main disadvantages of IPOs are: High management cost: Listed companies are required to set up internal controls and improve the accuracy and openness of their financial reporting. The cost of securing internal control systems, such as internal audit staff.
What is the difference between a dual listing and a secondary listing? ›
The phrase dual-listed stocks refers to companies listed on multiple exchanges when those exchanges differ widely in terms of region or requirements. Secondary listings tend to refer to companies getting listed on exchanges that share more similarities than differences.
What is a dual-listed company arrangement? ›
A dual-listed company structure is effectively a merger between two companies, in which they agree to combine their operations and cash flows, and make similar dividend payments to shareholders in both companies, while retaining separate shareholder registries and identities.
If you decide to buy a home that was listed with your agent, it's possible that your agent, or at least the broker's company, will end up acting as a "dual agent," representing both you and the seller in the transaction.
What is a dual primary listing? ›
Dual listing (dual primary listing)It means that both capital markets are primary listing places. If it has been listed on the US market, it will be listed on the Hong Kong market in accordance with the rules of the local market.
What is a dual listed stock one that trades in? ›
A dual listed stock is one which trades in more than one marketplace (market "venues") - for example, a young West Coast company might have listed on the Pacific exchange when it was still small; and then listed on the NYSE when the company became large enough.
How does dual listing affect market cap? ›
On a micro level, dual-listing does not affect stock prices. The prices on the different exchanges will be the same when you account for currency differences and transaction costs.
Are dual-listed stocks fungible? ›
Cross-listed stocks, or the shares of stock listed on multiple exchanges, are still considered to be fungible. The shares represent the same ownership interest in a firm whether you purchased them on the New York Stock Exchange or the Tokyo Stock Exchange.
Can I buy a stock on one exchange and sell it on another? ›
It is now simpler than ever to trade and invest in stocks, thanks to the emergence of different electronic trading platforms. Many investors do, however, wonder if shares can be purchased on one market and then sold on a different one. We'll love to break it to you that, yes; it is very much possible.
What are the risks of buying from a secondary market? ›
Overall, investing in secondaries can provide benefits such as diversification, access to established companies, potential for higher returns, and liquidity, but it also carries risks such as valuation risk, market risk, exit risk, and information risk.
What is the difference between secondary listing and dual listing? ›
A dual listing refers to a company getting listed on two or more primary stock exchanges. Secondary listing is when a company lists its same stock on other stock exchanges than the primary one. Dual listing offers companies additional capital and higher liquidity because their shares are accessible to more investors.
