Byline: Lisa Kassenaar Bloomberg Business News
TORONTO -- As Canadian companies rush to list on U.S. stock exchanges, investors on both sides of the border say it doesn't matter where they buy Canadian equities -- as long as the price and the timing are right.
"Number one, investors should buy the stock wherever it is available at the cheapest price," said Brian Shaw, managing director of institutional equities at CIBC Wood Gundy Securities Inc.
Together with stock exchanges' quoted bid and ask figures, the best price is a function of foreign exchange rates, transaction costs and market participants, or liquidity, analysts said.
Andy Pillara, portfolio manager for the $40-million (U.S.) Robertson Stephens Global Natural Resources Fund in San Francisco, agreed. "I look at the prices in Canada and the United States and choose the better price," he said.
About 190 of 1,275 companies listed on the Toronto Stock Exchange also trade on the New York Stock Exchange, Nasdaq Stock Market or American Stock Exchange.
Canadian executives are eager to tap the U.S. market, which is 10 times larger than the investor pool at home, and see their company studied by influential U.S. brokerages, said John Cucchiella, a financial adviser at Midland Walwyn Capital Inc.
Still, for many well-known companies such as Seagram Co. Ltd., the Montreal-based liquor and entertainment conglomerate, and Northern Telecom Ltd. of Mississauga, the extra listing merely offers investors a chance to shop around for the best price, some analysts said.
Seagram's average daily volume on the New York Stock Exchange during the past three months was more than 399,000 shares, compared with 354,000 shares on the TSE.
"Which exchange we do a transaction on is entirely a function of which lets us get it done -- whether that's on the Toronto Stock Exchange or Nasdaq isn't really relevant," said Richard Piotrowski, an analyst at Levesque Beaubien Geoffrion Inc.
Just as liquidity is key to purchasing stocks at the cheapest price, plenty of available buyers are needed to reap the biggest returns when selling, he said.
Mr. Piotrowski follows stocks listed in both Toronto and New York, including software publishers Hummingbird Communications Ltd., Cognos Inc. and SoftQuad International Inc.
Canadian computer industry companies are among those that jumped at the chance to list in the United States during the past few years to feed massive investor appetite. U.S. trades have meant stellar price appreciation for companies such as Cognos, Mr. Piotrowski said.
In an effort to make Toronto prices consistently more competitive and boost liquidity, the TSE in April became the largest exchange in North America to adopt decimal pricing.
That reduces the possible spread between the bid and asked prices to as little as 5 cents (Canadian), down from 12.5 cents when prices were quoted in eighths, as they are on many U.S. exchanges.
"You can't deny there is a fair amount of liquidity in the U.S. market [because of its size], but we are seeing that rise on the TSE," said Fred Ketchen, senior trader at ScotiaMcLeod Inc. "Moving to decimal pricing was the first step."
Nevertheless, "investors should take their dollars and do the best to make sure they buy interlisted stocks at the cheapest," Mr. Ketchen said. "Sometimes that's on the TSE and sometimes that's elsewhere."