Hafnia’s OTCQX Cross-Trade: Generating Wider Recognition with U.S.-Based Investors
Aug 3, 2023
To truly grow and compete, global companies cannot simply think locally. A case in point is Hafnia Ltd. A leading tanker owner, Hafnia was listed on the Oslo stock exchange in April 2020, the culmination of its merger with BW Group. Going public in Norway, allowed the company to unlock shareholder value by enabling access to a broader set of public investors. The public listing was a start but what about the broader and deeper U.S. market? For a global company like Hafnia, tapping into the U.S. market is a meaningful opportunity.
Although the Oslo Børs is an internationally well-respected stock exchange, U.S. investors find trading directly on the exchange challenging. As with all foreign stock exchanges, there are issues with currency conversion, broker connectivity, and time zone differences.
As background, OTC Markets Group Inc. operates regulated markets for trading in 12,000 U.S. and international securities. Data-driven disclosure standards form the foundation of their three public markets: OTCQX® Best Market (“OTCQX”), OTCQB® Venture Market, and Pink® Open Market. Foreign-listed issuers, like Hafnia, can join the OTC Markets using their Norwegian filings and disclosures, eliminating any burdensome or duplicative regulatory requirements compared to a traditional exchange dual-listing. There are no SEC registrations, Sarbanes Oxley, or GAAP requirements for companies to trade on the OTC Markets who meet and utilize the SEC Rule 12g3-2(b) exemption. It could not be simpler or easier.
After their IPO in 2020, Hafnia’s ordinary shares became eligible for trading on the OTC Pink® Open Market (“Pink Market”) due to U.S. investor demand and the need to transact in U.S. dollars with U.S. ticker symbols. U.S. broker-dealers can facilitate these orders on the Pink Open Market without the underlying company’s engagement.
It was in February 2023 when Hafnia took a significant step forward by joining the OTCQX® Best Market to enable greater U.S. investor access. Upgrading from the Pink Market to OTCQX removed many of the compliance restrictions found on the Pink Market and opened the door to seamless and unfettered access to the entire U.S. investment base.
Notably, Hafnia’s market capitalization and home market trade volumes experienced remarkable growth since their admission to OTCQX. Investors in the U.S. could now consume their material news and trade their shares in a seamless fashion. At the time, Hafnia’s CEO Mikael Skov said, “By joining the OTCQX Market, we intend to generate wider interest and recognition with U.S.-based investors. We see first-hand the value created for companies that choose to cross-trade on OTCQX, and we are confident the widened U.S. investor base will be an asset in generating higher trading volumes and stronger shareholder returns.”
Hafnia’s decision to join OTCQX was driven by several key objectives. First, they wanted to expand their reach and garner interest from U.S.-based investors and eliminate the currency or connectivity issues described earlier. The transparent and efficient trading environment provided by OTCQX aligned with Hafnia’s commitment to best practices in corporate governance and made it easier for U.S. brokers and investors to access their Oslo-listed shares. Joining OTCQX allowed Hafnia to meet and adhere to Blue Sky laws, which are critical compliance regulations allowing them to reach all types of U.S. investors. Lastly, with investors in the U.S. now having seamless access to their ordinary shares in U.S. dollars, via U.S. brokers, and during U.S. trading hours, Hafnia was able to enhance their local market volume by tapping into a deeper pool of capital. Hafnia took ownership of their U.S. trading and disclosure, effectively aligning their goals and initiatives to their commercial and equity strategies creating a global trading solution.
The growth achieved by Hafnia is demonstrated by key statistics, such as their increased market capitalization. Global average daily trading volumes were 2.1 million shares in Hafnia’s first 45 days of trading on OTCQX, a 35% increase compared with volumes from the previous year. And on average, spreads have fallen from $2.08 in Hafnia’s first week of trading on OTCQX to $0.42 after three months on the market, showing a measure of improved liquidity in a short amount of time.
In conclusion, Hafnia’s entry into the OTCQX Market has proven to be a remarkable success story so far. By joining OTCQX, the company has expanded their reach, attracted new investors, and experienced significant growth in trading volumes. Hafnia’s history demonstrates the benefits and opportunities available to companies seeking to maximize shareholder value through the OTCQX market and the ease of access it provides to U.S. investors.
The New York Branch of Skandinaviska Enskilda Banken spearheaded Hafnia’s upgrade to OTCQX by serving as their OTC Sponsor.