After weeks of anticipation, Aurora Cannabis Inc. ((ACB:CA)) gave us more details on its big board listing this week. Currently only trading on the Canadian exchange, the company’s common shares will list on the New York Stock Exchange (NYSE) before the end of the month pending regulatory approval.
Share prices tend to get a lift from U.S. listing, as U.S. investors can buy the stock more easily and volume rises.
Will U.S. Listing Bring A Price Pop?
The Canadian exchange is just not as liquid as their big board neighbors to the south. Lower liquidity means less volume and usually a bigger spread between bid and ask prices. Sellers and buyers alike are less likely to get the price they want when volumes are low and spreads are big. So, listing on the NYSE will give Aurora’s stock some tangible benefits to investors. It will also make the stock less volatile, which means institutional managers and brokers can consider it less risky for their funds and clients.
These costs due to thin market depth and trade execution delays can easily add up to more than the commissions they pay.
Another risk soon to be wiped out stems from foreign exchange. Hedging currencies can be costly and can turn a good investment bad. When Aurora begins trading in the U.S., investors there won’t have to worry about their currency cost when buying and selling. Neither will they have to watch the Canadian dollar should they own the stock.
Or Is The News Priced In?
It is possible the news of NYSE listing is already baked into Aurora’s share price, given that news of a potential listing has been public for some time. Moreover, the stock has been trading Over the Counter in the U.S. for a while under OTCQB:ACBFF. Nonetheless, as Chief Corporate Officer for Aurora Cam Battley stated when Aurora Cannabis Inc (TSX:ACB) announced its intention to list on a major US stock exchange, NYSE listing makes the stock more attractive to “U.S. institutional investors, not all of whom can trade in OTC-listed securities.” Institutional money is considered less volatile than retail, as well.
Aurora Cannabis has been one of the most trending cannabis tickers on the TSX since 2017 and usually among the most traded volume stocks. One thing that’s for sure is that this listing will enhance trading efficiency and price discovery for Aurora’s shares, and there is bound to be upside when it debuts trading as a less risky ticker for U.S. investors.
This author is not invested in the company mentioned or has any plans of doing so.
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