The differences between primary and secondary listings
As Nio moves into Singapore for its second secondary listing, The Edge Singapore explores the difference between a primary listing and secondary listing, as well as Singapore’s secondary listing market. According to local bourse Singapore Exchange (SGX), the regulatory approach for primary and secondary listings differ. The place of a company’s primary listing, or home exchange, will fully impose its listing rules on the company. In contrast, where a company is secondary-listed on an exchange, or the host exchange, will generally rely on the home exchange to regulate the company.
Additionally, the host exchange will subject the company to obligations on the disclosure of material information, in addition to the host exchange’s admission criteria.
Nio has yet to offer any updates to its main listing on the New York Stock Exchange (NYSE), which could see it delist due to the US imposing stricter auditing laws on Chinese companies across all exchanges. This has caused the stock to plunge some 51% year to date, and its listing status is also hanging by a thread, as the company is not profitable.
Nio has said in a news release that it will “continue to comply with applicable laws and regulations in both China and the US, and strive to maintain its listing status on both NYSE and the Hong Kong Stock Exchange (HKSE), in compliance with applicable listing rules”.
Analysts are prepared for the company to be delisted in NYSE. And if it comes down to that, Tim Hsiao, research analyst for Morgan Stanley, believes that Nio’s secondary listing in HKSE will be converted to its primary listing within a year and its listing on SGX will become its secondary listing and help the company to gain more traction by broadening its investor base. Nio is listing on SGX without raising any funds.
“With full fungibility, Nio’s dual-listings in Hong Kong and Singapore should meaningfully hedge any potential US delisting disruption to operations and funding access,” adds Hsiao.
Some of its peers have also gone down the route of listing in both the US and Hong Kong. Two such companies are Li Auto and XPeng. Li Auto has a dual primary listing on Nasdaq and HKSE, while XPeng has a dual primary listing on NYSE and HKSE. Both are also at risk of delisting from their respective exchanges in the US.
Nio’s listing in Singapore may have helped to alleviate investor concerns, but what is the purpose of a secondary listing?
Apart from helping the company gain a larger investor base, as stated by Hsiao, the dual listing can bring about greater liquidity for a traded stock, as it allows for a larger number of participants to buy and sell the stock, thus reducing the bid-ask spread, says Phillip Securities in a May 19 report.
Singapore and Hong Kong do not have much of a time difference, but in general, dual listing on exchanges within different time zones allow for an extended amount of time for trading on multiple markets, says Phillip Securities. Some companies that enjoy this perk include SGX-listed Sarine Technologies, which is also dual-listed on the Tel Aviv Stock Exchange that is five hours behind Singapore, giving investors that much more time to trade on the stock.
The dual listing strategy may also result in heightened consumer awareness as more awareness of a company among investors could draw more consumers towards the business and in part increase sales and transparency, says Phillip Securities.
Other companies that have a secondary listing on SGX include Jardine Matheson, Prudential, Lonza, Top Glove Corp,IHH Healthcare, Sri Trang Gloves, Sri Trang Agro-Industry and more.
It seems like SGX is welcoming dual listings on its exchange. Philippines-based whiskey company Emperador is also seeking a dual listing on SGX. The company was reportedly mulling over the secondary listing back in July last year, raising as much as $1 billion. And if the listing is successful, there is a possibility for the stock to be included on the Straits Times Index (STI).