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What is a Cross Listing?

John Lister
John Lister

Cross listing is when a company lists its stocks on two different stock exchanges. In most cases, this involves exchanges in two different countries, though it is possible to do so on two in the same country. While this can bring a wider pool of potential investors, it can also increase administration.

The most common form of cross listing involves a company launching a primary listing in its home country, then later having a secondary listing in another country. In some cases, this is because a company begins doing business in another country, for example a Canadian firm that expands into the United States, and wants to better reflect this. In other cases, it is a tactical move based on increasing take-up of the stock.

Man climbing a rope
Man climbing a rope

One of the main reasons for cross listing is to make the stock available to more people worldwide. This means the company can take in more money from new stock issues. It is also likely to increase liquidity in the stock, giving company owners more flexibility in their ownership stake.

The other major attraction of cross listing is that it forces a company to meet the listing requirements of both countries. This can make the company appear more reliable and trustworthy to potential investors. This is a particular advantage to companies based in countries that require comparatively little detail in public flotations. That these companies can then meet the tougher requirements of, for example, the United States, can improve their international credibility.

There are several other minor advantages of cross listing. One is that companies benefit from twice the opportunities to attract media coverage. Another is that it becomes easier to take over a foreign company in a deal where payment is in stock rather than cash. Companies cross listing also have the option of issuing stock as a form of bonus to staff working in the relevant country.

There are some inherent drawbacks to cross listing, mainly centering on the need to go through the flotation process twice and then meet two different sets of ongoing requirements. For all companies, this creates additional costs, both in direct spending and on internal administration. For companies that are not as well established or financially stable, the listing process in the second company may bring an added level of scrutiny that causes problems.

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