RBA: Little value in listing offshore
A new report by the Reserve Bank says Australian companies don't necessarily increase shareholder value by moving their listings to overseas exchanges. The dual-listed company (DLC) structure has been used by companies in recent years to merge with firms listed in the UK, forming BHP Billiton, Rio Tinto and Brambles.
The RBA study found that two of the three DLCs consistently traded at a significant premium in the Australian market compared with the UK market. BHP's Australian stock has averaged a 7 per cent premium since its merger with Billiton, and Brambles 8 per cent, while Rio Tinto's local shares have traded at an average discount of about 2 per cent since 1995.
In theory the share prices of the two companies should be identical in a common currency but in practice there are significant differences in prices. The report states that this result tends to refute claims that Australian companies can increase shareholder value by moving to larger foreign exchanges. The RBA said other research had also found examples of DLC “twins” having substantially different valuations, for which there was no convincing explanation.