Companies used to accumulate foreign listings like boy scouts collect badges or travelers leave stickers on their luggage. But listings on overseas stock exchanges have fallen from favour because they are too complex and don’t work. The Aviva insurance group is thus going against the trend in seeking a New York listing.
Aviva is the first UK business to list in New York since 2000. The traffic has been the other way, with companies such as Cable & Wireless scrapping their US share quotations for lack of use.
But the big decider for many companies in cancelling their American listings was Sarbanes-Oxley, the draconian legislation introduced after Enron. The bureaurocracy made it too difficult to bother with (though it also made it extremely complicated to cancel a listing too).
Aviva admits it has spent two years working on its New York Stock Exchange listing and refuses to reveal the cost. As well as compliance costs, any company considering a foreign listing should be prepared for heavy listing fees, SEC filings, bankers’ charges, brokers’ costs, investor relations bills, payments to depository banks, additional printing expenses and possibly translation costs too. And that’s assuming the accounts don’t have to be restated too.
Companies that issued new shares to accompany foreign listings often found the proceeds didn’t cover the costs.
The supposed benefits are that US investors can deal in their own timezone on their own exchange and — because UK shares are consolidated into chunkier units — at a price they think looks more valuable. Some companies used to seek overseas listings to keep the locals happy after a foreign takeover or to have locally-traded paper for bids.
The process involves swapping shares for ADRs — American depository receipts — that are traded like IOUs. But many companies found there is very little trading at all. Cable & Wireless cancelled its listing because Americans preferred to deal in real shares: less than 1 per cent of trading in C&W was in ADRs. Vodafone issued £100bn of shares for its takeover of German rival Mannesmann and obtained a listing in Frankfurt but abandoned it within five years because trading there was minimal.
Once there were more than 40 UK companies listed on the Tokyo stock exchange but after Barclays and BP cancelled last year there are now none.
Aviva, which operates in the US through its recent AmerUs takeover, reckons 20 per cent of its shareholders are American and thinks the New York listing will bring in more US investors.
London attracts overseas companies because it has liquidity. New York has that too, but that’s why foreign firms come to London and UK companies don’t need to go abroad. Now that exchanges cross timezones and oceans to offer global competition, investors can trade anywhere, anytime, any way.
Aviva has gone against the trend but it will only have reversed it if others follow — and most boards still regard a listing abroad as an expensive luxury.
(Pic: IanPhilipMiller cc2.0)
