As regards the analysis of the liquidity and the volumes, the
majority of foreign cross-listings (circa 60%) does not meet the efficiency
definition and may be considered as inefficient. Among the 40% efficient
foreign cross-listings, we may be doubtful about their durability and thus,
about their future. According to the tendency we have emphasized in part
IV.3.b. Current Tendency: the "Fading Listing", we have the confirmation of
investors preference for the most liquid trading place. This last evolution
leads to disparity between listing places, where the most liquid place
irremediably increases its share in total volumes at the expense of the
secondary listing places.
The foreign cross--listing, an "endangered specie" ?
Efficient foreign cross-listings may be depicted into 3
classes: those resulting from merger/acquisition operations, those performed in
the United States, and finally those performed in a financial place specialized
in the company's sector.
As we demonstrated in part IV.3.b. Current Tendency: the
"Fading Listing", the notion of fading listing lets us suggest that efficient
foreign cross-listings resulting from mergers/acquisition operations, but also
those performed in financial places specialized in the company's sector, do not
provide convincing findings and therefore have theoretically no future within
the current context of financial markets.
As regards the efficient foreign cross-listings belonging to
the last class, i.e. those performed in the United States, they present good
results and thus have the best likelihood to "survive". However, our part
111.2. A Major Tendency Has Emerged outlines that American stock exchanges have
strongly been impacted by a set of withdrawals performed by foreign companies;
tendency which has been spectacularly increasing during the last few years and
reached its paroxysm in 2007. This tendency mainly concerns European companies
and, according to a study53 of the Committee on Capital Markets
Regulation (CCMR), "from 1997 to 2006, the foreign delisting rate from the NYSE
averaged 5.3%. When in 2007 the rate spiked to 15.1% (representing delistings
by 68 foreign companies)". Such alarming delisting rate, should theoretically
lead to the rapid "extinction" of foreign cross-listings in the United States.
In this perspective, there remain the cases of foreign cross-listings in the
United States performed by companies originating
53
Committee on Capital Markets Regulation (CCMR,
http://www.capmktsreg.org),
2007, "Non-U.S. Company Delisting from Nyse soared in 2007"
from emerging countries; but it would not be an heresy to
announce that these cases should have the same destiny as the European ones.
However such evolution should happen in the long-term, i.e. as soon as
financial places in emerging countries would be enough developed.
By taking into consideration the previous points, within a
long-term perspective could we conclude that the foreign cross-listing should
finally completely disappear ? Obviously, the answer about the future of
foreign cross-listing is not as simple as seem to suggest our previous
assumptions. First of all, it is important to notice that before every
assumption we have made in this chapter, we have used the term "theoretically".
Indeed, we may not provide any Manichean answer nor doing any radical
announcement such as "in X years, Y% of foreign cross- listings should have
disappeared", since another factors beyond those concerning the liquidity and
the volumes have to be taken into consideration. Finally, it would be rather
difficult to povide precise figures about a tendency which will spread over
several years.
Furthermore, some elements are pleading for the
sustainability of foreign cross- listing in the long-term.
First of all, merger/acquisition deals will ever exist. For
many decades, the number of this type of operation has strongly surged, leading
to the creation of multinational companies with multi foreign cross-listings.
As long as merger/acquisition operations between companies will exist, there
will be foreign cross-listings.
Secondly, we have to take into consideration the political
matters we have named "national sensibility" or simply "economic patriotism"
(see part I.3.b. Corporate Governance Motivations). Nowadays, we could say that
this point is another main obstacle to the complete "extinction" of foreign
cross-listings. As we state in the analysis of ArcelorMittal (see following
part IV.5. ArcelorMittal's Case Study), it is inconceivable that this company
leave the Belgian, the Luxembourgian or the Spanish stock exchanges, even if
there are no financial rationales behind such poor traded volumes.
However, may be the on-going revolutions in the stock
exchanges industry (see part III.3. A New Deal in the Stock Exchanges Industry)
and the development of new technologies applied to the finance will have the
last word. Finally, the only one event which could lead to the definitive end
to foreign cross-listings would be the creation of a unique worldwide stock
exchange. But it is currently impossible to predict that such situation would
ever happen.
