In this series, we bust the jargon and explain a popular investing term or theme. Here it’s Dual listing.
What is dual listing?
When a company whose shares are already quoted on one stock exchange seeks to also list on another exchange in a different country. This allows the shares to be traded on both exchanges.
There are various benefits, such as access to a wider pool of capital. There is also the hope of a boost to the share price.
Armstrong Teasdale, the legal firm, says the reasons why a company should seek a dual listing in London include ‘an enhanced corporate profile’. The move should inspire greater investor confidence since ‘London markets are globally recognised for their standards of regulation and oversight’.
Which are the most famous dual listing companies?
Petrobras, the Brazilian oil giant, is probably the best known. It is listed in Brazil and New York. A dual listing may be the most convenient arrangement in the case of a takeover. This was the case when the American cruise company Carnival acquired its UK 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, with its shares being quoted in sterling.
How does a dual listing work?
A dual-listed company is made up of two separate companies, each with a set share of the underlying business.
Each company has its own directors, and each is allowed to be a member of its country’s stock market index.
In the case of a dual-listing in London and New York, say, investors are not permitted to buy the London shares and sell them in New York. The price on both exchanges should be roughly the same.
Is there a simpler alternative?
Dual-listing is obviously complex and costly, but there is a less complicated alternative: the cross-listing.
Under this system, there are no separate legal entities.
If a company can demonstrate that it meets the requirements of an exchange and will treat all shareholders equally, it can list its shares.
Equinor, the Norwegian oil company, has a cross-listing in Oslo and in New York.
Why are they in the news?
The issue has come to the fore amid the row over the flotation of Arm, the British tech company which is owned by Japan’s SoftBank. Shares in Arm used to be traded in London and New York before it was acquired for £24billion by SoftBank in 2016.
Chancellor Rishi Sunak wants Cambridge-based Arm, which could be valued at £32billion, to list in London. But SoftBank thinks the Nasdaq in New York more suitable.
Hermann Hauser, Arm’s co-founder, argues that a dual listing would be the natural solution to what he calls London’s ‘lack of liquidity and analyst expertise’.
Do firms give up dual listings?
Yes. Miner BHP was listed in Sydney and London, where it was on the FTSE 100.
But in January, shareholders supported the ending of this arrangement.
The move was prompted by its exit from oil and gas, and wish to diversify into other areas. The main listing is now in Sydney.
Shell scrapped its listing in London and Holland ‘to strengthen competitiveness’ and make shareholder payouts easier.
Restructuring was one of the reasons why Unilever also opted for London, ending its dual-listing in London and Holland in 2020.