Why You Can Expect More Nordic Companies To Cross-Trade In The US In 2020

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

For OTC Markets, 2019 was about geographical expansion. The company opened its first international office in London last January, and added more than 300 securities from 16 stock exchanges, bringing the total number of countries represented on its markets to 38.

In 2020, the company is focusing on one area they think is primed for growth: northern Europe.

We caught up with Chris King, senior vice president of international corporate services at OTC Markets, after a recent trip to London and Vienna to ask about that international growth and what’s so special about northern Europe specifically.

Benzinga: Why northern Europe? What’s enticing about that market?

King: The Nordic region has tremendous opportunity for us as a business because they have a very vibrant small and medium-sized enterprise [SME] market. Companies tend to find they're somewhat underserved by their local markets, and they look to the U.S. to grow their investor base.

We historically haven’t focused much time on the Nordic region, but organically over time companies have come to us. One of our larger issuers in Finland, for example, Norsk Hydro NHYDY NHYKF and Metso Corp MXCYY, Norsk Hydro is $7.5 billion in market cap. There are large established companies throughout Europe who have been visiting the U.S. for many years and who do things the right way. Being on OTCQX maximizes their access to U.S. institutional and retail audiences.

Benzinga: How much of an impact do you think Brexit has had on European companies wanting to have their shares trade in the U.S.?

King: Across Europe, we’re seeing increased demand. If you look at Europe, it’s in transition. Brexit is very much a part of the thinking. Whether it’s Brexit or MiFID II, companies are coming under increased pressure not just to be more proactive, but perhaps more sophisticated in their approach to investor engagement. Companies like BASF, Lufthansa, BNP Paribas, and Britvic have been trading on our OTCQX market for years. Long before either MiFID or Brexit. While companies rightly consider cross-listing on a U.S. exchange as extremely expensive and burdensome, with the changes we’re seeing across Europe, our model becomes a more obvious solution for issuers looking for cost-efficient access to the U.S.

Benzinga: Are there specific types of companies from this region that you’re contacting about trading on your markets?

King: The companies that are on our market today include large companies from Norway, Finland, and Sweden. We talk a lot about Roche, Adidas and Heineken because they’re easily recognizable brand names. But we know that for every Roche, there’s hundreds of companies small-cap space who we can support in their goal to efficiently access the U.S. For the majority of these companies, it would be ludicrous to join another exchange here in the US. But our model allows for companies in the small and micro-cap space from a variety of industries, from shipping to beauty products to gaming to cross-trade. Our goal isn’t to focus on a specific industry or a specific kind of company. It's more about serving the needs of issuers allowing for access to U.S. investment.

Benzinga: What’s your pitch to these companies about opening themselves up to U.S. investors?

King: Certainly, the region has a plethora of small, early stage companies. Many look to the U.S. and want to raise money here or they see their long-term plan to be here. For some it’s to raise visibility, build a brand, or operations; for others it’s to diversify U.S. ownership and achieve fair valuation. Cross-trading on our OTCQX Best Market or OTCQB, our Venture Market, enables companies to accomplish their goals without an SEC filing requirement. Being able to rely on their home exchange listing without joining a second exchange, but having a U.S. dollar quote, is a unique and extremely cost-effective solution.
In the short space of time that we have dedicated resources there...it's clear that companies see value and there's demand.

Benzinga: When you talk to these companies, do they need convincing about having their shares trade in the U.S.?

King: Generally, companies don’t need convincing about the value of coming to the U.S. It's about how to do that in an efficient way. A lot of the rhetoric revolves around ‘You have to have a U.S. listing to be successful,’ but I think our larger clients—like Roche Holdings RHHBY and BNP Paribas BNPQY—have proven that they can qualify to trade on any exchange globally. They all choose to cross-trade on our OTCQX market because it’s the smart move. It provides them with all of the secondary trading and visibility that they need in the U.S. without the cost and complexity of a second exchange. It’s really about educating companies on their options and for the company to make a decision that fits with their strategy.

I'll give you an example. IDEX Biometrics IDXAF is a Norwegian-listed company on Euronext in Oslo. They are about $83 million U.S. market cap, but they have staff in the U.S. We received an inbound call from the management team who explained that they have pain points. Being listed in the Nordic region does not mean U.S. investors can trade the stock. Having staff here made it challenging not just for employees to trade but to attract institutional investment, family office, and financial advisors looking to trade on behalf of clients. Now, they trade on our OTCQB Market and that issue is resolved.

Benzinga: What’s a characteristic that a company would need to have in order to be qualified to trade on OTC Markets?

King: One of the subjects that we typically cover with a potential client is the benefit of having a sophisticated investor relations program. There's no point switching the lights on and hoping that people are simply going to trade. It's less about the characteristics of the company itself and more about their behavior. You must go out and market, you have to meet with investors, whether it be at conferences or roadshows.

Benzinga: Are there other areas of the world you’re targeting to attract more companies?

King: When we commit to a region it’s for the long term. For 2020 we've committed to western and northern Europe. Who knows where the next area of growth will come from. For us, it’s about being able to have the resources to properly support that effort.

We've got clients from 38 countries, wherever there are markets that need support and that are interested in engaging with us, we will be there.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.