Cross-Listing
What Is Cross-Listing?
Cross-listing is the point at which a company in one country becomes listed on more than one exchange or an exchange in another country. A business would commonly need to become cross-listed on the off chance that it required access to more capital than is accessible on one exchange or on the other hand assuming the move was part of its strategic growth plan. This strategy enjoys several benefits and detriments.
To be approved for cross-listing, the company being referred to must meet similar requirements as some other listed member of the exchange as to accounting policies. These requirements incorporate the initial filing and progressing filings with regulators, a base number of shareholders, and least capitalization.
Understanding Cross-Listings
The term cross-listing is in many cases in reference to foreign-based companies that decide to list their shares on U.S.- based exchanges like the New York Stock Exchange (NYSE), yet firms based in the U.S. may decide to cross-list on European or Asian exchanges to gain more access to an overseas investor base.
Multinational corporations will quite often list on more than one exchange. These companies might list their shares on both their domestic exchange and the major ones in different countries. For instance, the multinational corporation BP (BP)- previously British Petroleum-trades on the London Stock Exchange and the NYSE.
Benefits to Cross-Listing
Albeit many companies opt to list just on their neighborhood exchange in their nation of origin, there are benefits to cross-listing on various exchanges.
Access to Capital
A portion of the benefits to cross-listing incorporate having shares trade in numerous time regions and various currencies. The international exposure furnishes companies with more liquidity, significance there's a sound amount of purchasers and merchants in the market. The additional liquidity furnishes companies with a greater ability to collect capital or new money to invest in store for the company. Companies can fund-raise by giving new shares of stock or corporate bonds, which are debt instruments that pay interest to investors in exchange for cash.
Improves a Company's Image
Companies that cross-list on international exchanges frequently do as such, in part, to support a company's brand. By listing on various exchanges, any positive news will probably be carried by international media outlets. A company with an international brand will in general be viewed as a major part in an industry. Companies can utilize that brand name to help sales and earn more media consideration in the nearby foreign markets.
Likewise, a few companies might see a higher corporate standing of having its shares listed on at least two exchanges. This can be particularly true for foreign companies that cross-list in the U.S. The people who gain listings in the U.S. do so through American depositary receipts (ADRs). The ADR list is long, with numerous natural names like Baidu Inc. of China, Sanofi of France, Siemens of Germany, Toyota and Honda of Japan, and Royal Dutch Shell of the U.K.
For instance, companies that are settled in emerging nations could cross-list on major exchanges in the U.S. or on the other hand London to improve the company's picture, particularly since the major exchanges have more severe listing requirements.
Neighborhood Presence
A cross-listing can assist companies that with having offices or manufacturing facilities overseas by upgrading their picture with the nearby individuals. Thus, the company probably won't be viewed as a foreign corporation. As an active participant in the nearby markets, companies can better enroll capable workers.
Requirements and Hurdles with Cross-Listing
A company's stock must meet the exchange's listing requirements for any exchange they're listed on as well as pay the fees to be all listed. The adoption of Sarbanes-Oxley (SOX) requirements in 2002 made cross-listing on U.S. exchanges more testing due to the requirements in regards to accounting, auditing, and internal controls, which puts an accentuation on corporate governance and accountability. There are likewise varieties of the required accounting standards for financial reporting between international markets. U.S. companies, for instance, must stick to GAAP or generally accepted accounting principles, which may be a difficult hurdle for certain companies whose home exchange might have laxer standards.
Certifiable Example of Cross-Listing
Albeit the U.S. has customarily had harder listing requirements, there was a remarkable exception in 2014 with the Hong Kong Stock Exchange (HKG).
Alibaba Group Holdings Ltd. (BABA), the Chinese internet business behemoth, looked for listing on the Hong Kong Stock Exchange however was dismissed due to corporate governance rehearses. Alibaba's dual-class structure permitted too much power in the hands of a small number of people at the company when it came time to choose board members. Subsequently, Alibaba continued with its initial public offering (IPO) on the NYSE in September of 2014, which turned into the biggest IPO in U.S. history around then.
The company stated that it preferred to list in Hong Kong, however it ended up in the U.S. with an excited and deep base of institutional investors to support its equity. In November of 2019, Alibaba at long last got cross-listed on the Hong Kong Stock Exchange with an offering of 500,000,000 new equity shares.
Features
- Companies must meet the exchange's listing requirements to be cross-listed.
- Benefits to cross-listing incorporate having shares trade in various time regions, supporting liquidity and giving access to new capital.
- Cross-listing is the listing of a company's common shares on an unexpected exchange in comparison to its primary and original stock exchange.
- Alibaba Group is an illustration of a cross-listing since the web based business goliath is listed on the NYSE and the Hong Kong Stock Exchange.
FAQ
What Are the Disadvantages of Cross-Listing?
A company that cross-records might cause extra costs to meet the regulations and requirements of the exchanges and countries they wish to be listed on.
For what reason Do Companies Cross-List?
Cross-listing provides a company with a bigger pool of foreign investors, access to more capital, and lays out a presence in the countries the company records in.
What Are Cross-Listed Companies?
Cross-listed companies are businesses that become listed on more than one exchange or an exchange in another country.
