Magazine article Management Today

Overseas Equity Listings - Alluring but Expensive

Magazine article Management Today

Overseas Equity Listings - Alluring but Expensive

Article excerpt

The virtues of trading stock abroad are sometimes overrated

When Cadbury Schweppes began trading its stock (strictly ADRs, American depositary receipts) on the New York Stock Exchange in May, it joined 38 other listed UK companies. Thirty-three of these have joined the NYSE within the past 10 years. Clearly these companies see advantages in listing in an overseas equity market. What are these advantages? And what has dissuaded others from seeking, or maintaining, an overseas listing?

British Petroleum stock has been trading on the NYSE since 1970. Ian Stewart, chief press officer, reasons it makes sense for local investors to have easy access to BP's equity, even though a greater mobility of capital across borders these days suggests less need for an overseas listing. 'Without a local listing, investors can still encounter difficulty in trading the shares out of the company's domestic market,' he says.

Easier access to a company's shares, of course, also means easier access for the company to the pockets of the local investor. This point is taken up by Nigel a Brassard, head of equity capital markets at Kleinwort Benson, which helped both PowerGen and National Power to list on the NYSE last year. 'One reason for listing is to get access to investors in that country,' he says, adding that some investors are only willing to buy securities that are quoted on the domestic exchange. However, as a Brassard notes, 'the value to European companies of selling stock to Mr and Mrs Joe Doe of Cincinatti is sometimes questionable.'

The inability to attract the right kind of investor on a sufficiently large scale has caused certain companies to discontinue overseas listings. British Gas was the first major privatisation of the. Thatcher government and was deemed ripe for listing on the Tokyo Stock Exchange. …

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