Going public is a pivotal juncture in a company’s journey, providing broader access to capital. Yet, expanding beyond the confines of one’s national borders to seek additional capital can be essential. Redomiciling, dual listing, and cross-listing are all avenues that grant access to foreign stock markets, but the merits of each option diverge.
While the terms “dual listing” and “cross-listing” are often used interchangeably, the differences between the two can lead to confusion. The technical disparity lies in the fact that cross-listing entails the same shares of a company being listed on different exchanges, while dual listings involve two separate companies operating as one, with their stocks listed on two different exchanges.
Both dual listings and cross-listings offer access to foreign capital markets without relinquishing the home market. In contrast, redomiciling entails the actual relocation of a company’s base of operations to another country, rather than simply listing its shares on a foreign stock exchange.
Uprooting the entire company is more than just a change of address. It constitutes a substantial, seismic shift, but one that may be the appropriate course of action for some companies. Here’s what you need to understand about redomiciling in comparison to merely dual listing or cross-listing.
Deciphering Dual Listings and Cross-Listing
The crux of the matter is that dual listing or cross-listing results in listings on two or more stock exchanges. By contrast, redomiciling involves moving the domicile, or home country, of a company to another country, thereby facilitating a switch from one country’s stock exchange to another.
An exemplar of a company that has cross-listed is U.K.-based Unilever, which was initially listed in London (ULVR) before cross-listing in Amsterdam (UNA), with a third ADR listing in the U.S. (UL). However, it’s essential to note that American Depository Receipt shares are not actual shares.
Instead, they are certificates issued by a bank that represent a foreign company’s stock and can trade on an exchange without the company being registered on that exchange. Trading on a foreign exchange without the requirement of being registered on it offers clear benefits for companies, but those advantages are beyond the scope of this article.
Despite these advantages, cross-listed companies must adhere to the same requirements as any other stock trading on the exchange where they seek to trade, typically including various regulatory and accounting obligations. Furthermore, cross-listed companies must abide by all the regulations established by each stock exchange on which they are listed.
“Foreign companies aspiring to leverage the U.S. capital markets need to assess the level of engagement and commitment to our regulations, which are amongst the most stringent worldwide, that they are willing to undertake,” explained Louis Taubman, a partner at the law firm Hunter, Taubman Fischer & Li, LLC. “There is no right or wrong answer in this regard. It is truly a matter of balancing the needs of each individual company and its shareholders with the costs and benefits of the available options (i.e., dual and cross-listing or redomiciling).”
Why Opt for Redomiciling?
Cross-listing on other exchanges may incur significant expenses, including listing fees, legal and accounting charges, and other associated costs. However, it also enhances the company’s liquidity, provides access to investor capital in another corner of the globe, and extends the trading hours for its stock.
However, a company may prefer redomiciling for various reasons. For instance, some companies relocate their operations to a new location with more liquid capital markets than those available in their home country.
Financial hubs like the U.S., Toronto, London, and Hong Kong may offer more capital to companies than smaller markets. Moreover, the cost of equity capital may be lower in these larger markets than in smaller ones.
“Redomiciling to a U.S. exchange is a natural progression for any venture exchange companies, especially those listed in Canada,” emphasized Alyss Barry, co-founder and principal at IRLabs. “Redomiciling to the U.S. opens the door to a larger pool of liquidity, providing issuers with an opportunity to captivate more substantial interest and trading.”
The Rise of Redomiciling Among Companies
In today’s competitive global market, companies are increasingly open to the idea of redomiciling: relocating their corporate headquarters to a new country. This strategic move has gained traction due to the potential for accelerated growth and strategic advantages. Many Canadian-listed companies are crafting their ‘roadmap to the U.S.’ as a part of their capital markets strategy, to leverage the unique benefits of being listed on the Nasdaq Composite. This change of domicile expands companies’ possibilities for acquisitions, simplifies corporate structuring, and increases access to capital.
Redomiciling: A Case in Point
The decision to redomicile presents a complex scenario for each company, entailing significant expenses and requiring astute timing. Despite the costs involved, the benefits have outweighed the detrimental aspect for numerous companies. Take, for example, Incannex Healthcare (IXHL), which recently completed its redomiciling from Australia to the U.S., subjecting itself to the jurisdiction of the U.S. Securities and Exchange Commission and the Nasdaq.
The benefits highlighted by Incannex management included greater access to a capital market more in tune with the company’s value proposition, simplified corporate structure, and enhanced access to the resources of the U.S. Food and Drug Administration. This shift is driven by the intention to maximize shareholder value, as articulated by Incannex Healthcare CEO and Managing Director Joel Latham.
Similarly, FREYR Battery (FREY) received approval to redomicile from Luxembourg to the U.S., with the intent of simplifying its corporate structure, enhancing shareholder value, and positioning itself as a leading U.S.-based scaling partner of choice for battery technology solutions.
Public and Investor Relations for Redomiciled Companies
Redomiciling requires meticulous planning and specific public relations and investor relations needs in the new market. Shareholders should be well-informed about the relocation, and companies may engage public relations firms with expertise in the unique challenges faced by publicly traded and redomiciled companies in a new market. Furthermore, companies redomiciling to new markets will need to allocate increased budgets for marketing and PR to establish a brand reputation and investor base in the new market.
Ari Zoldan is CEO of Quantum Media Group, LLC, and Incannex Healthcare is a client of Quantum Media Group.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
