Secondary listing, or cross-listing, is a hot topic in the financial world, with more and more companies considering this approach as a means of expanding their reach and gaining access to new markets.

This concept is not without controversy, however, and there are both advocates and detractors who argue passionately about the pros and cons of this strategy.

Supporters of this approach point to the increased liquidity and exposure that it can provide, while critics argue that the costs and complexity of maintaining multiple listings may outweigh the benefits.

Regardless of where you fall on this debate, there’s no denying that it is a powerful tool for companies looking to grow and diversify their investor base.

In the following paragraphs, we will explore the idea of secondary listing in more detail, examining its advantages and disadvantages, and providing guidance for companies considering this approach.

What is a Secondary Listing?

Secondary listing is a process whereby a company lists its shares on a secondary stock exchange in addition to its primary listing on its home exchange. In order to find out the difference between primary and secondary listings, let’s first understand what primary exchanges and primary listings are.

The primary exchange is the main stock exchange where a company’s shares are listed and traded, typically located in the company’s home country or region while the primary listing is the original listing of a company’s shares on its primary exchange.

The primary exchange plays a crucial role in the listing and trading of a company’s shares, providing a platform for investors to buy and sell those shares, and setting the rules and regulations that companies must follow to maintain their listings.

It also ensures that companies comply with regulatory requirements, such as disclosure rules and financial reporting standards. A cross-listing on another exchange can provide a range of benefits, such as increased liquidity and access to new investors in different regions.

If a company decides to pursue a cross-listing, it must consider the procedures and costs associated with maintaining dual listings.

How Does Dual Listing Work?

A dual listing is a process in which a company’s shares are listed on two or more stock exchanges simultaneously. This allows the company to access multiple markets and diversify its sources of capital.

There are two main methods of dual listing:

• Interlisting (also known as cross-listing)

  Interlisting involves listing the company’s shares on multiple exchanges and allowing them to be traded and settled independently on each exchange.

  This means that investors on each exchange can buy and sell the company’s shares without having to go through a foreign exchange or broker. However, the company is subject to the regulations and reporting requirements of each exchange where its shares are listed.

• American Depositary Receipts (ADRs).

  In contrast, ADRs are securities issued by US banks that represent shares in foreign companies. ADRs allow US investors to buy and sell shares in a foreign company without having to go through the complexities of investing directly in foreign exchange.

  The ADRs are listed on a US stock exchange and can be bought and sold like any other US-listed stock.

• Dual Listing Process

  The dual listing process typically involves a company meeting the listing requirements of each exchange where it wants to list its shares.

  This may involve meeting certain financial and regulatory standards, as well as completing various administrative and legal processes. Once listed, the company must comply with the reporting and disclosure requirements of each exchange.

Advantages of a Dual Listing 

While dual listing can have some drawbacks, such as increased costs and regulatory complexity, it also offers several advantages, including:

• Increased liquidity

  By listing on multiple exchanges, a company can access a larger pool of investors, which can increase the liquidity of its shares. This, in turn, can help to increase the value of the company’s shares and make it easier to buy and sell them.

• Diversify capital-raising activities

  Dual listing can also help a company diversify its sources of capital by accessing different markets and investors. This can reduce the company’s reliance on a single market or investor base and provide it with more options for raising funds.

• Improved visibility and credibility

  Listing on multiple exchanges can enhance a company’s visibility and credibility, as it signals that the company is a significant player in multiple markets. This can help to attract new investors and increase the company’s brand recognition.

• Access to different regulatory frameworks

  Listing on multiple exchanges can also provide a company with access to different regulatory frameworks, which can offer greater flexibility in terms of compliance and reporting requirements. This can help the company to tailor its compliance efforts to the specific requirements of each market and optimize its reporting practices.

• Currency benefits

  Dual listing can also provide currency benefits to the company, as it can denominate its shares in different currencies on different exchanges. This can help to mitigate currency risk and optimize the company’s financial performance.

• Opportunities for international growth

  Dual listing can provide a company with opportunities for international growth by enabling it to tap into new markets and expand its customer base. This can help to diversify the company’s revenue streams and reduce its dependence on any single market.

Disadvantages of a Dual Listing

While a dual listing can have several advantages, such as increased liquidity, wider access to capital, and greater visibility in different markets, it also has some drawbacks. Here are some of the disadvantages of a dual listing:

• Expensive

  Dual listing can be an expensive process, as it requires a company to meet the regulatory requirements of multiple exchanges. The cost of complying with the different regulations, such as legal, accounting, and listing fees, can be significant, particularly for smaller companies.

• Need for additional legal and finance staff

  A dual listing requires a company to maintain compliance with the regulations of multiple exchanges. As a result, the company may need to hire additional legal and finance staff to manage the complexities of meeting the regulatory requirements of multiple jurisdictions.

• Increased administrative burden

  A dual listing can increase the administrative burden on a company, as it has to maintain multiple sets of accounting and reporting standards, as well as comply with the different disclosure requirements of the exchanges.

• Differences in trading hours

  Dual listing can result in differences in trading hours between the different exchanges, which can make it difficult for investors to keep track of the company’s performance.

• Currency fluctuations

  Dual listing can expose a company to currency fluctuations, as the company’s shares may be denominated in different currencies on different exchanges. This can create currency risk and affect the company’s earnings.

• Regulatory complexity

  Dual listing can be a complex process, as different exchanges have different regulatory requirements. This can make it challenging for a company to comply with all the regulations and maintain good standing on both exchanges.

How Does a Dual Listing Affect a Company’s Share Price?

The impact of a dual listing on a company’s share price can depend on several factors, including the company’s performance, the characteristics of the exchanges where the shares are listed, and the behavior of investors. Here are some ways in which a dual listing can affect a company’s share price:

• Increased liquidity

  It can potentially increase the liquidity of a company’s shares by making them available to a broader range of investors across different markets. This increased demand can lead to an increase in the company’s share price.

• Improved visibility

  Dual listing can also enhance a company’s visibility and credibility, as it signals that the company is a significant player in multiple markets. This increased visibility can help to attract new investors and increase the demand for the company’s shares, which can contribute to a rise in the share price.

• Diversification

  Dual listing can help a company diversify its sources of capital and reduce its reliance on a single market or investor base. This can make the company more attractive to investors and increase demand for its shares, which can lead to a rise in the share price.

• Currency fluctuations

  It can expose a company to currency fluctuations, as the company’s shares may be denominated in different currencies on different exchanges. This can create currency risk, which can affect the company’s earnings and potentially lead to a decline in the share price.

• Regulatory differences

  Dual listing can be a complex process, as different exchanges have different regulatory requirements. This can make it challenging for a company to comply with all the regulations and maintain good standing on both exchanges, which can negatively impact the share price.

What Is the Difference Between a Dual Listing and a Secondary Listing?

Here are the key differences between the both:

Dual Listing

• A company can have its shares listed on two or more stock exchanges simultaneously
• The company usually issues new shares to meet the listing requirements of the second exchange
• The company’s shares are subject to the regulatory requirements of both exchanges
• Trading volumes and liquidity may increase due to the availability of the shares on multiple exchanges
• The company may benefit from increased visibility and access to a wider range of investors

Secondary Listing

• A company can have its shares listed on a secondary stock exchange in addition to its primary listing
• The company does not typically issue new shares as part of a secondary listing
• The company’s shares are subject to the regulatory requirements of the secondary exchange only
• Trading volumes and liquidity may not necessarily increase as the company’s shares are still primarily traded on the primary exchange
• The company may benefit from increased exposure to investors in the secondary exchange’s jurisdiction.

What Are Some Companies With Dual Listings?

There are many companies that have dual listings, which means their shares are listed on more than one stock exchange. Here are some dual listing examples:

• Alibaba Group Holding Limited

  Alibaba is a Chinese multinational technology company that provides e-commerce, retail, and other services. Its shares are listed on the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEX).

• BHP Group Limited

  BHP is a global resources company that produces commodities such as iron ore, copper, and petroleum. Its shares are listed on the Australian Securities Exchange (ASX) and the London Stock Exchange (LSE).

• Diageo plc

  Diageo is a British multinational alcoholic beverage company that produces brands such as Johnnie Walker, Smirnoff, and Guinness. Its shares are listed on the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE).

• Nokia Corporation

  Nokia is a Finnish multinational telecommunications, information technology, and consumer electronics company. Its shares are listed on the Helsinki Stock Exchange (HEL) and the New York Stock Exchange (NYSE).

• Rio Tinto Group

  Rio Tinto is a global mining and metals company that produces commodities such as iron ore, aluminum, and copper. Its shares are listed on the Australian Securities Exchange (ASX) and the London Stock Exchange (LSE).

  These are just a few examples of companies with dual listings. Many other multinational companies have dual listings on major stock exchanges around the world.

Conclusion

Secondary listing can offer many advantages to companies, such as increased visibility, access to new investors, and diversification of capital sources. However, there are also several disadvantages to consider, such as increased costs and regulatory complexity.

Before deciding to pursue secondary listings, companies should carefully weigh the potential benefits and risks and assess whether the listing aligns with their strategic objectives.

Ultimately, a secondary listing can be an effective way for companies to expand their global reach and increase their market presence, but it is important to approach the process with caution and diligence.