SECONDARY LISTINGS - EXPAND INTO GLOBAL MARKETS
Written on the 1 December 2014 by Glenn Vassallo and Katie Johnston
SECONDARY listings can provide companies with innovative and progressive ways to raise capital.
The Hong Kong Stock Exchange (HKEx) is a logical and synergistic option for Australian companies looking to expand into secondary markets and tap into a new network of funds.
The HKEx appeals to domestic companies for numerous reasons, including its analogous time zone to Australia and close trading and business links to other high growth Asian economies.
In Q4 2014, the HKEx experienced a 57.1 per cent increase in the number of newly listed companies.
As at the end of October 2014, the total market capitalisation of listed securities on the HKEx (Main Board and GEM) was HK$25.3 billion (approximately AUD$3.75 billion).
HKEx prides itself on having ‘zero capital flow restrictions, numerous tax advantages, currency convertibility and free transferability of securities’.
Importantly, companies expanding to a secondary listing in Hong Kong enjoy a broader investor base which can translate to increased liquidity and improved access to capital.
Another advantage from the company’s perspective is an increased profile and global presence, which can be valuable when expanding brands or operations into other markets or overseas.
From a shareholder’s perspective, a secondary listing may also offer diversification of their investment and potentially lower investment risk as the shares are exposed to two or more markets rather than just one.
These benefits are particularly attractive when considered against the current Australian market.
In the mining and resource sector alone, Australian companies are feeling the pinch of a shifting economic climate.
According to the recent Grant Thornton Junior Mining and Exploration Report (JUMEX), almost 60 per cent of JUMEX respondents experienced working capital constraints during FY14, leading to project delays and limits on exploration activities.
To avoid this trend continuing, we recommend mining companies consider whether a secondary listing (also termed a ‘cross listing’) may assist their growth and performance in 2015.
Companies with supply agreements with Chinese customers/end-users or Asian operations should consider the HKEx because of the depth of funds in the large Asian markets, relatively high price-to-earnings ratios and strong liquidity.
GRT Lawyers has recently advised a number of its clients on the secondary listing process, with a view of capitalising on these opportunities.
While there are many obvious benefits, the secondary listing process requires expert legal guidance from advisers who also understand your business’ commercial objectives.
Should you require more information or advice regarding secondary listings in Hong Kong, GRT Lawyers has an experienced and specialised team to lead you through the process.
Author: Glenn Vassallo and Katie Johnston
About: Glenn Vassallo is a managing partner and Katie Johnston is a senior associate at GRT Lawyers.