Having recently acted as Bermuda counsel to a Hong Kong listed company on its successful secondary listing on the London Stock Exchange, we thought it would be helpful to summarise the benefits of a secondary listing to companies whose shares are already listed in Hong Kong or another global stock exchange.
Benefits and Costs of a Secondary Listing
There are a number of benefits associated with a secondary listing. In a recent example, a Bermuda company determined that a listing in London, in addition to its listing on the Hong Kong Stock Exchange, would benefit its geographically diverse shareholder base, assist in building its profile, and provide a greater market for trading in its shares. For other companies with global business operations, such benefits should be equally applicable.
A secondary listing is generally expected to have the effect of:
- Increasing liquidity in a company’s shares due to the additional platform for trading shares provided by the secondary stock exchange;
- Diversifying the investor base of the company by providing access for investors who customarily trade shares on the secondary stock exchange but who do not trade shares on the primary stock exchange;
- Potentially allowing for more trading time of the company’s shares if the primary and secondary stock exchanges are open at different times;
- Raising the profile of the company by having it make necessary public disclosures as required by the rules of the secondary stock exchange, increased media exposure and coverage by analysts based in the secondary stock exchange’s country; and
- Providing an additional avenue for fund raising for the company by way of new share issues to investors based in the secondary stock exchange’s country, potentially at a lower cost.
There are some potential costs to a secondary listing, including increased reporting and disclosure requirements associated with being listed on two stock exchanges, and additional listing and other fees payable to the secondary stock exchange, but such costs are outweighed by the benefits outlined above.
Steps and Processes to Implement a Secondary Listing
From a Bermuda or Cayman perspective, a company currently listed on the Hong Kong Stock Exchange with standard bye-laws or articles of association should enjoy a relatively straightforward process:
- No shareholder approval should be required. Resolutions of directors should suffice.
- If the shares are to trade in the form of depositary interests, the establishment of any branch register of members required to implement such trading arrangements.
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