An interlisted stock is one that involves more than one exchange. It is usually in a company’s home country and one or more additional countries. The primary benefit of interlisting for the company is gaining exposure to more investors and capital. In other words, it is a cross-listing. Sometimes, it refers to as dual listing although the term dual listing can have a slightly different meaning.
How Interlisted Stocks Work
The two stock exchanges that commonly trade are Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE). It provided that it met the requirements of regulators in both Canada and the U.S.
For example, Sun Life Financial, a Canadian financial services company, is listed on both the NYSE and TSX, which means investors can buy and sell shares in the company on both exchanges.
Advantages of Interlisting
The advantages of listing on more than one exchange include gaining access to more investors and increasing a stock’s liquidity, which in theory lowers the cost of raising capital.
For example, Canadian companies may want to gain more exposure to international investors by listing in the U.S. This includes investors outside the U.S. who buy stocks on U.S. exchanges. On the other hand, dozens of companies on the TSX are also in a U.S. exchange.
Interlisting may also raise awareness of the company’s brand and add to its credibility and prestige, especially if the second listing is on Wall Street. Many companies have shares that trade on exchanges in several countries.
Considering the affirmative point, it has also the disadvantages. The main disadvantages of interlisting include the cost of listing on more than one exchange. Another point is about the possible additional and tougher regulatory requirements in the second country.
Interlisting, Cross-Listing, and Dual Listing
In Canada, the term interlisting is a common thing. In other words, it has the same meaning as cross-listing or dual listing. But, dual listing also refers to an arrangement by which two companies function as one entity but maintain separate listings, almost always in different countries.
Arbitrage and Interlisted Stocks
It is possible for master traders to profit from deviations in share prices of interlisted stocks on the different exchanges. The currencies of the countries also involve in its list. In other words, it is called arbitrage. It is a complicated and has a high-risk trade that depends on prices eventually converging.