Cliffs Natural Resources Inc. (CLF)
In this paper we examine the dynamics of cross-listing, particularly US companies that cross-list in the NYSE Euronext equity-based exchange. We look at the number of US firms cross-listed in this exchange and then study one of these companies specifically, Cliffs Natural Resources, Inc. In addition, we explore the importance of cross-listing in NYSE Euronext as well as: the benefits, costs and requirements of fast path cross-listing and the trading volumes of the shares transacted in the exchange.
The foundation of our case study is based on Cliffs Natural Resources Inc. (CLF), an international mining and natural resources company headquartered in ...view middle of the document...
The positive outcomes of this listing did not wait, CLF opened on Euronext with an Initial 17.25 million-share offering from which European investors acquired 80 percent. Furthermore, a year after the listing, the proportion of CLF's institutional shareholder base in Europe and the U.K. quadrupled, rising from 2 percent to 8 percent of all institutional shares in the company (Melnitzer).
There are about 50 U.S listed companies cross listed on the NYSE Euronext (Melnitzer). Of these companies, 22 are US-based. Based on their market, firms are listed as follows: 4 companies are registered in NYSE Euronext Brussels and 18 are registered in NYSE Euronext Paris. Some of the well “renounced” US firms cross listed on NYSE Euronext are: The Proctor and Gamble Company, GE, Ford Motor, Coca-Cola, Pfizer Inc., Merck & Co., Inc., Cliffs Natural Resources Inc., Caterpillar Inc., International Business Machince Corp., among others. For a complete list, please refer to Appendix A.
The best advantage is the reduction in the cost of capital. Cross-listing is probable that it reduces the cost of capital because the closing of domestic markets, the efficient frontier is determined just for the set of domestic assets. Thus, the equity cost of capital depends on the risk premium of the domestic market portfolio (Lasfer 3).
Some benefits of cross list in foreign capital markets can be: an increase of visibility of the firms; establishment of a secondary market for shares which can be used as incentive for employees and management in a foreign subsidiary; political acceptability to its customers, creditors, and suppliers (Lasfer 3).
NYSE Euronext is an exchange group which offers a global cross-listing market, visibility and trading platform, providing cost-effective, access to liquidity and investors in the U.S. and in Europe. This group offer to the organizations: the ability to raise and trade capital in $ and EUR, and contact investors and constituents directly across the world (NYSE Euronext, New Releases).
US firms cross list in European market because it offers many benefits for those companies. Some of the benefits are: (1) facility to trade and list in dollars and euros; (2) ability to get investors whose mandates only allow investing in euro-denominated; (3) access to European investors and a diversified shareholder base; (4) ability to raise capital in the European Union; (5) provide shareholder liquidity at a reduced cost; (6) less rigorous regulatory requirements; (6) a tool for employee stock purchase plans or equity incentive plans; (7) a facility for future capital raisings and/or Merge & Acquisitions activity; (8) media coverage which can enhance their global profile; (9) the ability to grow international exposure for the company; (10) branding and product visibility opportunities in all of NYSE Euronext’s European locations (London, Paris, Amsterdam, Brussels and Lisbon); (11) commitment to a strategically important region...