Shares: Secondary Listing / Cross listing

Kaleidocoke

Hi all,

I am hoping someone can help me with the following:

I am looking to get into share investments but there is one thing that really confuses me, namely secondary listings or cross listings of shares. In more detail, I have identified a company that I want to invest in. This company has a primary listing in Athens.

Now I cannot buy the shares directly from the Athens exchange because my stockbroker account does not trade this market. However, according to the FT, the same company also has listings in 9 other countries (5 times in Germany / 3 times in London at the LSE).

Now my questions:

1. How can the company be listed three times at the LSE? Are all these listings the same?

2. The only listing which shows daily trading is the one in Athens. If I check for the share in London, two of the three listings stand at 0.00 with no trading activity this year. The third London listing shows some trading activity, however the none since April 2014.

3. The share price of the London listing is different from the Athens listing, even though both are denominated in EUR (according to the FT).

4. In more general terms - what is the difference between the primary and secondary listing and can it be that the prices vary between the exchanges (e.g. that a stock is down in, say, Ireland, but the same stock is trading up in London?)

Points 2 and 3 above really confuse me and I have been trying for days to make sense out of this. Can somebody shed a little bit of light into this for me? All companies I have identified trade somewhere abroad and I need to figure out whether to go for the primary listing or the secondary listing and I am really reluctant at the moment since I clearly dont understand what is going on.

Many thanks all.

grey_gym_sock

ordinary shares, preference shares, bonds, of several kinds, issued by the same company?

or: GDRs, ADRs, etc - each of which represent some number of the company's shares, but not necessarily 1 share?

or: the same share can be traded in different currencies on the same exchange.

primary vs secondary listing does not necessarily matter, but if you try to deal where dealing is thin, you may get worse prices, or not be able to deal in larger volumes.

Kaleidocoke

Hi, thanks! I think they are all ordinary shares. I am really confused by these London listings. In Germany for example its listed at 5 exchanges but they are all in different cities and all have trade activity. In London only 1 of the 3 shows trade activity (the two have been completely idle for years). Can it be that they have been superseded?

Also, in Berlin there were a total of 6K shares traded yesterday, in Munich a total of only 900 shares and in Athens a total of 500K. Does this make any difference to my investment?

I guess more generally the question is - do my holdings benefit equally when the share price goes up, regardless of where I bought the shares (i.e. at which exchange?).

Thanks for all the answers.

bowlhead99

Kaleidocoke wrote: »

I guess more generally the question is - do my holdings benefit equally when the share price goes up, regardless of where I bought the shares (i.e. at which exchange?).

Thanks for all the answers.

If it's the exact same share with the same voting rights and dividend then it doesn't matter where you buy it. You are buying the same item.

However, supply and demand and liquidity might be very different on an exchange with 500k trades than at one with 1k traded. So one of the prices might go up, and another might not. You guessed right in your original post where you asked, can it be that the prices differ between the exchanges? Yes it can. In the same way that a bottle of ketchup can be different at Tesco vs Aldi vs an independent. Or the price of a bet on the World Cup at William Hill vs Ladbrokes vs Betfair vs Betdaq.

Also, you might find the place with only 1k of daily business is more expensive to buy the volume you want and then when you come to sell it you receive less than you could have offloaded that volume onto the busier exchange. But sometimes there will be quirks making the price different from one place to the next that don't seem to follow the logic.

If I look at a company I'm invested in, http://www.hvgpe.com/
The front page says the price at LSE is 11.34 but the price on Euronext in Amsterdam is 11.50. It is literally the exact same share with the same rights to vote and get distributions etc.

However the prices reported are only mid-prices anyway with a bid/offer spread around them. So in practice I am unlikely to be able to load up with a London broker and then walk over to Amsterdam and dump them all and profit from the difference ; the shares are thinly traded in both locations so in reality it would cost me over 11.40 to buy in London and I'd be getting no more than that when selling in Amsterdam. If I go back a couple of years, I think the difference was bigger and London was the more expensive place to buy. So if I could have been bothered, I should have bought them on Euronext instead. But frankly it was less hassle to buy in London.

With the HVPE example, back in spring 2012, both exchanges were pricing in the $6-$7 range. Now they are in the low $11 range. The share price went up because the company has continued to be prosperous and everyone in the international market for buying and selling these shares are now more confident, so that they will pay 11-odd dollars instead of 6-something. But when you say "do my holdings benefit equally when the share price goes up, regardless of where I bought the shares" the answer with HVPE would have been, no, not exactly equally. Because on one exchange it might have gone from 6.50 to 11.50 and the other from 6.75 to 11.34. One is a worse percentage than the other, as it happens.

Of course, if the market is generally happier with the shares they will go up and if generally less happy they will go down. If there was a massive difference between the prices on the exchanges, people would literally buy on one and sell on the other as I alluded earlier - this 'arbitrage' opportunity keeps the prices broadly consistent, at least for large volumes.

The mid price is just an indication anyway, it is the 'offer' and 'bid' prices either side that represent the highest price you have pay to get a 'normal market size' purchase, or the lowest price you could sell a 'normal market size' pile of shares. The NMS is set by the exchange and usually some function of average market volume over time. You might find that the volume is very thin on your market of choice, and in that case if you are doing a large trade you would have to pay more than the offer.

So, if you want to buy 100,000 shares but yesterday the entire exchange only traded 900 shares, in some cases you might not even get a firm quote to make an instant decision and have to leave an order with the broker to buy at best price, or up to a certain limit price. For you, it sounds like Athens is clearly the best place to try to buy these shares but if that is not an option then it probably makes sense to find the next best one.

To try to find the 'next best', a snapshot of just one days trading is not much of an indicator really and there will be quirks every so often between them, so you'll probably find that all the secondary listing locations will be much of a muchness. Just check there have not been any official announcements from the company that they are going to pull any of the secondary listings (which some smaller companies do from time to time if there is no meaningful trading). You would still own the shares but would have to find somewhere else to sell them which would be a pain.

Kaleidocoke

Thanks for this, very helpful. I think I understand the whole thing a little better now. I will just buy these shares tomorrow and see what happens.

IronWolf

Basically a share is a share, it can be bought and sold on different exchanges that allow it.

You can also get shares like this in different currencies, and the shares will usually be different but rank equally with each other so equivalent in effect.

Be careful of ADR's because they can represent a number of shares and not necessarily 1. Make sure you know how many before you buy.