Seek Dual-Listed Companies to Add Liquidity

Recent insights from Nasdaq Chief Economist Phil Mackintosh discussed why expanding listings to the United States can be beneficial for companies. In particular, Mackintosh cites research from Virtu that highlights the low trading costs present within the United States. Reduced trading costs can help lower the costs of capital.

“The U.S. also has a large source of investment capital, with a mature fund (buy-side) industry, retirement plans, and retail investors making up a larger source of investors than many other countries,” Mackintosh added.

In examining the benefits of cross-listing stocks to the United States, Mackintosh notes that companies from a few specific countries have seen more notable benefits than others. In particular, the Nasdaq research finds that “cross-listings of stocks from Canada and Hong Kong tend to add multiples to the liquidity of the underlying stock.”

For companies based in Canada, adding a dual listing in the United States opens up the potential for a wider investment base and access to capital within the U.S. market. Several Canadian ETFs can provide exposure to dual-listed Canadian companies. One such example is the iShares S&P/TSX Completion Index ETF (XMD).

While XMD primarily invests in small to mid-cap Canadian equities, many of the fund’s top holdings are companies listed in both Canada and the United States. These holdings include TFI International, Stantec, Descartes, and GFL Environmental, among others.

These dual-listed companies can provide the fund with the potential of increased liquidity. However, XMD does not exclusively invest in dual-listed Canadian companies.

XMD has provided investors with strong returns over time. The fund is up 11.39% over the last 12 months, as of March 31st, 2024. As of April 19, 2024, XMD has a distribution yield of 1.99%. The fund has a net expense ratio of 0.60%.

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