What is dual listing? investing explained
INVESTING EXPLAINED: What you need to know about dual listing: When a company with shares on one stock exchange seeks to list them on another
In this series, we break down the jargon and explain a popular investment term or topic. Here is the dual listing.
What is dual listing?
When a company whose shares are already listed on one stock exchange also seeks to be listed on another stock exchange in a different country. This allows shares to be traded on both exchanges.
There are several benefits, such as access to a larger pool of capital. There is also hope for a boost in the share price.
Armstrong Teasdale, the law firm, says reasons why a company should seek dual listing in London include ‘an enhanced corporate profile’. The move should inspire greater investor confidence as “London markets are globally renowned for their regulatory and supervisory standards.”
Twice: A dual-listed company is made up of two separate companies, each with a fixed share of the underlying business.
What are the most famous dual listing companies?
Petrobras, the Brazilian oil giant, is probably the best known. Listed in Brazil and New York. A dual listing may be the most convenient arrangement in the event of an acquisition. This was the case when the American cruise company Carnival acquired its British rival P&O Princess in 2002.
Carnival Corporation is listed in New York and its share price is quoted in dollars, while Carnival plc is listed in London and its shares are quoted in pounds sterling.
How does a dual list work?
A dual-listed company is made up of two separate companies, each with a fixed share of the underlying business.
Each company has its own directors and each can be a member of the stock market index of its country.
In the case of a dual listing in London and New York, say, investors cannot buy the shares in London and sell them in New York. The price on both exchanges should be roughly the same.
Is there a simpler alternative?
Double quoting is obviously complex and expensive, but there is a less complicated alternative: cross quoting.
Under this system, there are no separate legal entities.
If a company can show that it meets the requirements of an exchange and will treat all shareholders equally, it can list its shares.
Equinor, the Norwegian oil company, is cross-listed in Oslo and New York.
Why are they in the news?
The issue has come to light amid the dispute over the IPO of Arm, the British tech company owned by Japan’s SoftBank. Arm shares used to trade in London and New York before SoftBank acquired them for £24bn in 2016.
Chancellor Rishi Sunak wants Cambridge-based Arm, which could be valued at £32bn, listed in London. But SoftBank thinks the New York Nasdaq is more suitable.
Hermann Hauser, co-founder of Arm, argues that a dual listing would be the natural solution to what he calls London’s “lack of liquidity and analyst experience”.
Do companies give up double listing?
Yes. Miner BHP was listed in Sydney and London, where it was listed on the FTSE 100.
But in January, the shareholders supported the termination of this agreement.
The move was motivated by its exit from oil and gas, and the desire to diversify into other areas. The main roster is now in Sydney.
Shell removed its listing in London and the Netherlands “to strengthen competitiveness” and facilitate shareholder payments.
The restructuring was one of the reasons Unilever opted for London as well, ending its dual listing in London and the Netherlands in 2020.