For many Canadian companies, the successful listing of their security represents an important milestone. It’s a sign of recognition, prestige and success, demonstrating to the market a desire to be open and transparent. There are many reasons why a company may choose to list its shares – to raise capital, increase its valuation and diversify its shareholder base. But many companies are unaware that there are limitations as to what can be achieved by solely listing in Canada. They may not be cognizant of the fact that many U.S. investors are unwilling or unable to invest in foreign markets, and that the information they make available locally may not be widely available to U.S. investors. So, what is the best way to bridge this gap and access the world’s largest market for capital expansion and growth? Cross-trading.
There are numerous benefits to Cross-Trading in the US:
- Diversifying your shareholder base
- Making your financial information, research, pricing, and risk assessment more broadly available to U.S. investors
- Appealing to those investors who prefer securities traded domestically ($USD)
- Enhancing visibility among broker dealers by supporting broker and sell-side compliance
A national exchange, such as NYSE or Nasdaq, may be perceived to be the natural home and fit for most foreign issuers looking to access a deep pool of institutional investors. However, foreign issuers, such as those in Canada, are subject to U.S. exchange requirements and different accounting standards that can become duplicative, time-consuming and cost-prohibitive for global IROs with limited budgets. On the contrary, cross-trading on the OTC Market allows a company to leverage its existing reporting standards to make its disclosure available in the U.S. The simplified requirements to trade OTC remove duplication, are less-resource intensive and require fewer expensive experts. This secondary trading solution helps to remove trading restrictions and complements the company’s home market reporting process. In turn, a company improves its ability to maximize shareholder value, achieve better visibility and a fair valuation in the U.S. public market, while increasing the effectiveness of its investor relations program.
Cross-trading also presents both Canada and the US with reciprocal opportunities for issuers to enhance market liquidity, creating additional investing opportunities in a company’s home market and abroad. Providing a cost-effective trading environment in which to raise capital and build global investor awareness.
In addition to cross-trading, OTC Markets Group Inc. and the Canadian Securities Exchange (CSE) recently developed a first-of-its-kind North American capital formation and visibility solution for start-ups looking to go public. This alliance offers issuers the benefits of the IPO listing on the CSE, combined with secondary trading on OTC Markets’ OTCQX Best Market/OTCQB Venture Market. This affords investors and the broker dealer community greater access to a breadth of financial information, increased global investing opportunities and more efficient trading of international issuers shares. Simple processes and fixed fee structures remove many of the barriers of cost, time and complexity typically associated with going public on an exchange. Helping companies bridge the gap and expand their footprint– paving the way for capital expansion and growth.