That is a really good question – and the quick answer to that question is Yes.
Companies can list their shares on more than one exchange, which is called dual-listing. Stocks can actually be traded on any exchanges, where they are listed. Dual-Listing is also called cross-listing. A dual-listed company normally has a primary listing, which is the primary stock exchange where a certain company is traded. Of course, as in all business transactions, this comes with fees and listing requirements before it gets listed.
Complying with all those necessary requirements doesn’t usually happen in one fell swoop. There are a whole lot of continuing filings, shareholder number requirements, and capitalization that need to be met. More often than not, companies that list on offshore exchanges pick out exchanges with the same language and similar way of life. Big firms that are in the US usually are listed in the UK or in Canada as well.
Some multinational companies might list their stocks on multiple exchanges including the local ones and the major exchanges abroad. However, not all big companies actually list their stocks on dual-listing. Some just gave dual-listing a shot for a short period of time and then reverted back to a single exchange listing.
One of the main reasons for companies to have a listing in several exchanges is that it enlarges the liquidity of the stocks. There are plenty of available shares for the demand of the market. Also, when the liquidity for stocks is increased, it’s easier for investors to purchase and make a sale of the stocks at any time.
This is because the bid-ask spread of the stocks has gone down. The bid-ask spread is the amount by which the asking price or the selling price goes over the bid price or the buy price. Once the liquidity is increased on multiple exchanges, the bid-ask spread decreases, which makes it more convenient for the investors.
Now on Dual-listing price differences. You probably may have noticed that some stocks on different exchanges have different prices. You’re probably wondering why they have varied prices on different exchanges yet they belong to the same company. Ideally, stocks should have the same price even when they are listed on different exchanges. In all likelihood, these differences in prices happen because of different time zones, which means different training hours. The difference in price is usually quickly amended by the investors.
This time let’s take a look at the upside of dual-listing and find out why most big firms are interested in multiple listings. One strong merit of a dual-listing is accessibility to more capital. This is quite verifiable especially among offshore firms that are looking for the possibility to be listed on an exchange in the United States. Most of the offshore firms find value in being on the United States of America’s stock exchanges. This will give them more access to a big amount of capital of the world’s largest economies.
As mentioned above, another advantage of dual-listing is becoming more liquid. Stock investors have more alternatives where they can purchase shares or put their shares on sale. Of course, the bid-ask speed is also affected. The higher the stock’s liquidity, the lower the bid-ask spread. This results in a more convenient buying and selling of shares among the investors whenever they want to.
One more benefit of the dual listing is it attracts more investors with its increased profile for the public. Theoretically speaking, an increased public profile leads to more investors especially for companies outside the United States. The United States of America has some of the most reputable and respected as well as popular stock exchanges.
It goes without saying that the public profiles of these foreign companies can go a notch higher once they are listed on a U.S. stock exchange. On the other hand, American companies with a dual listing on offshore exchanges get little to zero increase in their public profiles. However, if these companies have important and significant operations in various countries, a dual listing is considered an advantage.
So if there’s an upside then there are also downsides. In recent years, some market researchers call into question the supposed benefits of dual listing. They raise doubts about whether these benefits actually make a lot of difference. But anyway, the most remarkable downside of a dual listing is its cost. It was mentioned early on that along with dual-listing comes a multitude of fees and requirements.
Another huge downside is that dual-listing is not that straightforward. It is actually very complicated. These exchanges have varied requirements and rules and legal procedures and even accounting standards.
Another cost is added on top of this since the company will be needing to add more staff in the legal and financial departments. The top managers also need to put in more time and some elbow grease in effectively communicating with a group of different investors altogether.
So, in short, the dual listing can be really tedious and costly.