Introduction
In an increasingly interconnected yet fragmented global economy, dual listings have reemerged as a pivotal strategy for companies seeking to navigate complex financial landscapes. With the rumour about Holcim’s possible dual listing, as well as Alibaba’s recent conversion to such, it seems like this complicated deal structure is making a comeback to equity capital markets, against the de-globalisation of the world. In this article, we will explore different types of dual listings, ranging from IPOs and mergers to spin-offs and simple conversions giving insights into their strategic benefits, operational challenges, and future trajectory. By the example of Alibaba, Carnival, and Holcim, we will explore the various facets of this multinational offering.
Overview
By definition, a dual listing is the listing of any security on two or more exchanges as two separate legal entities. These entities operate as one company but are legally distinct, often resulting from a cross-border merger. Shareholders also have the same rights to income and capital, regardless of which exchange they invest through. One should not confuse it with cross-listings, often seen as the more straightforward method where a firm meets the requirements of multiple exchanges but remains a single legal entity. The shares traded on both exchanges are interchangeable and will have near identical pricing on the different exchanges. A second distinguishment is to be made between dual listings and secondary listings. A dual listing primarily relates to listings on two or more exchanges when the exchanges differ significantly, particularly in regard to geography and requirements. A secondary listing is when the requirements and geography of the different exchanges hone more closely to one another.
Dual listings are inherently complex and involve significant coordination. Pricing synchronization between exchanges is essential to avoid arbitrage, and companies must comply with different regulatory frameworks, such as IFRS in Europe versus US GAAP. Companies typically choose their listing location based on cultural alignments, such as shared language. Still, many also prioritize exposure to the most advantageous market—often the capital market of the world’s largest economy, the US. However, due to various requirements by the exchange, a dual listing is not as easy to arrange, and bank came up with alternatives to cater to their investors. One popular resort is using American Depository Receipts (ADRs), which are negotiable certificates issued by a US depositary bank representing a specified number of shares, usually one share, of a foreign company’s stock and is therefore not considered as a dual listing. ADRs allow US investors to buy foreign stocks without navigating international exchanges and offer foreign companies access to US investors and capital. ADRs are categorized into three tiers:
- Level I: Traded over-the-counter with minimal compliance requirements
- Level II: Listed on major exchanges like NYSE, requiring adherence to stricter regulations
- Level III: Enables capital raising through public offerings, with the highest level of regulatory scrutiny
Besides the various layers of technicalities that are necessary for a dual listing, some drawbacks include the costs of the initial listing and the ongoing listing expenses. Companies must navigate differing regulatory, compliance, and accounting standards, often requiring additional specialized staff. Operationally, managing investor relations and disclosures across a second jurisdiction can be resource-intensive. Currency fluctuations and exchange rate risks are another significant challenge associated with dual listing. Companies with dual listings often have shareholders and investors in different countries, exposing them to fluctuations in currency values.
Despite these hurdles, dual listings remain a valuable strategy for many companies, as illustrated in the following case studies. Companies often choose to dual list to access broader investor bases, enhance liquidity, and increase market visibility. Listing in multiple markets offers nearly 24-hour trading due to different time zones, diversifies capital-raising opportunities with a larger investor pool, and improves investor interest. For example, natural resource companies in Australia and Canada frequently list in Europe to capitalize on investor demand in natural resource markets that European companies cannot satisfy. Although theoretically, a dual listing should not impact a company’s share price, since prices on both exchanges should align after accounting for transaction costs and exchange rates, market dynamics often tell a different story. Empirically, dual listings frequently lead to a stock price increase due to several factors. Greater visibility and accessibility attract new investors, often resulting in heightened demand and trading volumes. Additionally, the positive sentiment surrounding a dual listing, coupled with increased media attention and analyst coverage in different countries, creates a perception of global ambition. These dynamics can drive short-term and sometimes sustained price appreciation, demonstrating the tangible benefits of this strategy.
Alibaba
Alibaba Group Holding Limited [NYSE: BABA] [HKG: 9988] is a leading Chinese multinational conglomerate specializing in e-commerce, retail, internet and technology. Founded in 1999 by Jack Ma in Hangzhou, China, the company operates globally through e-commerce platforms such as Alibaba.com, Lazada, Taobao and Tmall. Alibaba Cloud is the leading cloud service provider with a market share of 40% in Asia, making itself as the fastest growing division, with a CAGR of 17.5% expected by 2028.
Alibaba Capital Partners is also one of the world’s largest venture capital companies, investing in innovative startups and established businesses across a range of sectors, especially in the tech field. Youku, Alibaba’s digital media platform, has nearly 460 million monthly active users, making it the most popular streaming platform born in China. The company continues to perform strongly, with revenues of $138bn in 2023, a current P/E of 18 (as of 22/11/2024) and a steady revenue growth supported by a robust gross profit margin of 39.1% (third quarter results of 2024). Alibaba is a strong and fast-growing company in most of its divisions, attracting interest of many Asian investors, particularly in China, India, UAE, Thailand and Vietnam.
It has experienced significant changes in its market quotations which have strengthen its position in the global market. Alibaba was initially listed on the New York Stock Exchange (NYSE) in September 2014 with a record IPO of $25bn valuing the company almost $231bn, it has later expanded its presence by obtaining a secondary listing on the Hong Kong Stock Exchange (HKEX) in December 2019. In addition, the company converted its HKEX listing from secondary to primary in August 2024.
With Alibaba’s conversion of its HKEX listing to a primary one, it now has primary markets on both exchanges. This change requires Alibaba to comply with regulatory standards of both the US SEC and the Chinese CSRC, adding a level of regulatory complexity in maintaining transparency and adherence to differing financial reporting, disclosure, and governance requirements from two major jurisdictions but also improving the company’s credibility in both markets.
Reasons behind the conversion
A dual primary listing allows Alibaba to access a wider investor base in China and in other Asian markets which is critical to attract investment from regions where Alibaba has a significant customer base. In fact, the Chinese government launched the Shanghai-Hong Kong Stock Connect program in 2014, a major initiative to promote cross-border trading between the Shanghai Stock Exchange (SSE), the Hong Kong Stock Exchange (SEHK) and the Shenzhen Stock Exchange (SZSE). This unique system offers triple access to the stock markets of both regions, allowing investors from China to purchase shares listed in Hong Kong and vice versa. With a primary listing in Hong Kong, Alibaba shares have qualified for being included in the Stock Connect program, facilitating access to investors from China.
By securing a primary listing in Hong Kong, Alibaba reduced its exposure to regulatory uncertainties in the US. Chinese companies have been facing increasing scrutiny from US regulators, particularly since January 2021 when the NYSE following an executive order from the government had prohibited US investments in companies linked to the Chinese military, removing from the listing China Telecom, China Mobile, and China Unicom. In March 2021, a second order was issued with CNOOC Limited, a Chinese oil and gas company, removed from the NYSE for similar reasons. In 2022, China Eastern Airlines and China Southern Airlines voluntarily withdrew their US depositary shares from the NYSE. By primary listing its stock in its home country, Alibaba is better positioned to safeguard its market position against geopolitical tensions among US and China by ensuring the continuity of its investor base.
In addition, Alibaba’s decision to suspend the planned IPO of its logistics division, Cainiao is another crucial factor in the shift from secondary to primary listing. Initially, Alibaba hoped to price Cainiao, its logistic division, with a valuation of $20bn. However, weak market conditions in Hong Kong made it difficult to generate sufficient interest among investors for the IPO. Moving to a primary listing in Hong Kong helps position the company for stronger access to Chinese investors, which could facilitate a possible future IPO in Hong Kong, supporting Alibaba’s strategy for long-term growth in a market crucial to its success.
Impact of Dual Primary Listing on Alibaba’s future
The conversion to a primary double listing had a positive impact on the performance of Alibaba’s stock. After the upgrade, Alibaba shares have seen a surge in trading flow activity reflecting increased investor interest. After the announcement, Alibaba’s shares in Hong Kong rose by a 5% to HK$83.9.
The move is seen as a strategic step to attract more investors from mainland China and other Asian regions, which account for almost 80% of daily trading flow, further expanding Alibaba’s investor base. Inclusion in the Stock Connect program should provide a crucial financial boost, keeping the average volume of trades high. Morgan Stanley analysts forecast net flows between $17bn and $37bn over the next 12 months. Furthermore, having a primary listing on Chinese territory could lead to greater goodwill from the Chinese government, which could prove vital for any future corporate finance activity such as a possible IPO of Alibaba’s division on Chinese soil.
Alibaba could set the stage for other Chinese giants
Alibaba’s conversion to a dual primary listing marks a significant turning point for other multinational Chinese companies. This move played by the giant-tech highlights the strategic advantage of diversifying market listings to enhance visibility and attract a broader investor base, especially when uncertain geopolitical conditions are foreseen. In future, other Chinese companies such as JD.com, Inc. [NASDAQ:JD] [HKG: 9618] or Baidu, Inc. [NASDAQ:BIDU] [HKG: 9888] that both have a primary listing in the US might opt for a primary listing in the mainland China following Alibaba’s lead due to the increasing regulatory and geopolitical tensions and the need to ensure consistent access to Asian capital thanks to the Stock Connect Program.
Carnival’s acquisition of P&O Princess Cruises Plc.
Carnival [NYSE: CCL] [LSE: CCL] [NYSE, ADS: CUK] is one of the main players in the Cruise boat business, with revenues exceeding $24bn and a fleet of around 91 boats. It has a market share of around 37.3%, closely followed by Royal Caribbean [NYSE: RCL] and Norwegian Cruises [NYSE: NCLH]. The growth of Carnival has not been purely organic, since it completed several acquisitions over the past decades. In particular, in 2002, the US-based cruise company completed the acquisition of P&O Princess, the parent company of P&O Cruises, the third larger player in the industry at the time.
The takeover process, though, was not linear, as it became a hostile takeover between Carnival and Royal Caribbean. In November 2001, in fact, P&O, another competitor, first announced that it had found an agreement with Royal Caribbean for a merger of equals between the two firms. The deal structure was unusual, though, as no cash or share would have been exchanged. Royal Caribbean equity holders would have retained a 49.3% economic interest in the newly created company, while P&O shareholders would have owned the remaining. Moreover, the deal was already structured such that the companies would have retained separate stock listings at the NYSE and at LSE.
Carnival did not let this opportunity go away and proposed an unsolicited bid for $4.6bn to acquire the entire company, only three weeks before the planned shareholder meeting to approve the aforementioned merger. The offer represented a 27% premium above the latest closing price of the share, thus a higher valuation compared to the one offered by Royal Caribbean. The board of P&O Princess, though, rejected this initial offer on the basis of stronger regulatory risks.
Carnival did not give up. It underlined the disproportionate amount of debt that the two companies would have contributed, with Royal Caribbean carrying around $4bn of debt, while P&O Princess only $1.4bn. The board of Carnival then decided to revise its offer, with a 12% increase. The overall offer topped $5b and was ultimately accepted by the Board of P&O.
Carnival’s deal rationale
The acquisition by Carnival of P&O was driven by the willingness to create the largest cruise fleet across the globe. Combined, the two companies would have operated 65 boats and generated around close to $7bn of revenues.
On the synergies side, the deal was expected to generate around $100m a year in cost savings, through the elimination of redundant functions within the two companies. In particular, management of both companies expected to be able to reduce expenses related to the administration, the purchasing activity, mainly of food and beverage for the fleet, and also to optimize the existing railway carriages and buses in Alaska.
The deal was also led by the strategic threat that a merger between Royal Caribbean and P&O would have posed. In particular, the two companies had very complementary routes, with Royal focused on the Caribbean and P&O focused on Europe, Australia and North America, and could have challenged the primary role of Carnival in the industry.
Results of the operations
As already structured in the first merger agreement between P&O and Royal Caribbean, the final terms of the acquisition by Carnival were defined such that the two companies would have continued to trade separately on the two stock exchanges. In particular, Carnival Corporation kept trading on the NYSE under the ticker CCL, while P&O Princess changed its name to Carnival PLC and kept trading on the London Stock Exchange with the ticker CCL. In addition, Carnival PLC now also trades through ADS on the NYSE, under the symbol CUK.
Despite the different share trading on the markets, though, holders of any of the stocks retain the same economic benefits.
Such a structure was designed to allow the existing shareholders of P&O to maintain, if needed or desired, their holdings in the UK-listed company, while participating in the newly formed global cruise group. In particular, existing shareholders of P&O could either keep their shares or exchange them for 0.3 shares of Carnival Corporation.
This approach provided the existing shareholder of P&O with greater flexibility compared to other merger agreements, both under portfolio allocations and liquidity in the market. First of all, forcing the exchange in US-listed stocks might have had implications for investors due to regulatory and tax reasons. Furthermore, in a scenario where existing shareholders could have only opted to receive ADS, the possibilities to then exchange these depositary shares would have been much lower, due to the lack of liquidity, and accompanied by higher trading costs. As a result, the direct dual listing represented an optimal scenario for the shareholders of P&O.
Holcim
Holcim Limited [SWX:HOLN], the Swiss producer of building materials, is considering a spin-off of its North America business which will possibly result in a dual listing of the entity.
The Holcim Group is a building materials manufacturer that is headquartered in Zug, Switzerland. The company employees over 60.000 people and operates in 60 countries, where it offers a broad range of ready-mix concretes, aggregates and cement, as well as additional solutions and products. Since the merger between Holcim and Lafarge in 2015, the combined entity is the leading the cement industry by occupying the largest market share.
In January 2024, the company published intentions to spin off its North America business in order to develop a leading pure-play building solutions, i.e. a solely focused on the construction market, player in the region. The spun-off entity would be valued at over $30bn and would even on its own hold the market leading position. Furthermore, the company would benefit from valuation premiums in the US, where companies in this sector trade with much more liquidity, which has continuously motivated players to move their main listings from Europe and the UK to the US.
Talks about a dual listing also in Switzerland became louder later in 2024, due to international investors and possible geographical issues. First of all, existing investors, which are mostly located in the US and Switzerland, would have to sell their shares on the US market, which could result in a so-called flow back of shares. This is often triggered when a deal results in the investment no longer meeting investment criteria, thus leading to selling pressure and decreasing share prices. Furthermore, the official headquarter would possibly remain in Zug, Switzerland, for tax reasons, while the operational headquarter would remain in Chicago.
These reasons could potentially trigger a dual listing, a welcoming sign for a weak European stock market that continues to fall behind its American counterpart.
Conclusion
Dual listings present a nuanced yet powerful tool in today’s equity capital markets. While they require significant coordination and come with regulatory, operational, and financial complexities, their benefits often outweigh the challenges. Companies like Alibaba and Holcim illustrate how dual listings can expand investor bases, enhance market visibility, and mitigate geopolitical risks. The ability to tap into diverse markets, access nearly 24-hour trading, and attract broader investor interest highlights the strategic value of this structure, particularly in a fragmented global economy. As corporations continue to face challenges such as regulatory scrutiny and de-globalization, dual listings remain an effective strategy for balancing local market engagement with global ambitions.
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