While the dual-listing system has been popular in Europe, the NSE IPO system in Asia appears to be very small. Since ASICs are required for primary and secondary equity issuance under the NSE IPO System, firms must decide which other Asian exchanges they would like to list before filing with ASIC. There is no way for a firm using the NSE IPO System to hold multiple simultaneous listings while still using this methodology.
The main benefits of using the NSE IPO System
The main benefit cited by companies that elect to use a dual-listing system over an NSE IPO System is that it allows a company to access two separate pools of capital while only having one set of compliance costs and reporting burdens. By doing so, these companies do not have to make a difficult decision to forego one capital pool.
For example, in the IPO filing by Credit Suisse and Infiniti Research Limited (CSI/IRL) on the Hong Kong Stock Exchange, it is stated that “Infiniti intends to use part of the proceeds from this Offering to repay outstanding indebtedness owed by CSI. Infiniti believes that centralizing all debt financing in its home market will reduce costs for both Infiniti and its investors.” To avoid turning down potential funding sources, these companies elect to have a dual-listing.
Other issuers who elected to list with multiple exchanges include China Southern Airlines Co., Ltd., which had a dual listing with The Stock Exchange of Hong Kong Limited (SEHK) and the Shanghai Stock Exchange (SHSE). With the dual-listing system, China Southern Airlines Co., Ltd. was able to pool together an offering of approximately USD 1 billion while keeping its compliance costs low.
A third subset of dual-listing companies includes pure internet IPOs who elect to list on more than one exchange due to language/translation issues. For example, NetEase Inc. became the first internet company to IPO on both The Hong Kong Stock Exchange and The New York Stock Exchange in 2012 through this methodology.
Another example is Qunar Cayman Islands Ltd, which is listed on NASDAQ and AIM. By electing to do so, Qunar Cayman Islands Ltd. could increase its free float by an additional 6%.
Drawbacks of using the NSE IPO System
Multiple benefits come along with listing on more than one exchange, but there are also drawbacks. The main drawback cited for this methodology is the cost increase in both money and compliance time/burden. There is a higher level of financial commitment due to the listed costs, legal fees, regulatory fees, marketing expenses, underwriting expenses etc.
Additionally, companies who elect to do so will be required to divide their management’s attention between two platforms, leading them to make less informed decisions when it comes to spending or allocating funds.
There will also be increased reporting burdens as companies will have to file reports with two exchanges instead of one. This can lead to firms’ more complex monitoring compliance and internal management process, especially regarding timely filings or correct accounting procedures.
Another drawback cited for this methodology is the possible inconsistency in financial reporting that may arise from companies advertising additional net income on different exchanges due to differences in IFRS’ operational standards on EPS calculations, consolidation methodologies, lease disclosures etc.
Regarding time efficiency, there are some concerns about how much more time management will require to prepare for listing on multiple exchanges correctly. Since the decision has already been made to list on multiple exchanges under this system rather than just one exchange under the dual-listing system, there is a risk that management may become over-stretched and thus less efficient in terms of the time they have available to allocate to each platform.
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