PanCanadian Energy Trading in the U.S.

Some high quality Canadian companies are now trading in the U.S. as well as in Canada.  We hope to get more of them in our coverage.  Anderson began trading on the NYSE only in May 2001 under the symbol AXN.  Some investors may be thinking that if AXN attracted a takeover bid within four months of listing in NY, how long would it be before the same happens to PCX?  Our goal is for PCX to appreciate, but we are not counting on a takeover.

When we were analyzing PanCanadian Petroleum we debated whether to recommend the stock when we did or to wait until trading started in the U.S.  That is now a moot point, as U.S. investors can buy the stock on the New York Stock Exchange and not be concerned about taxation of a special dividend.  Yet for those investors with efficient trading connections in Toronto, there are three stocks to consider. 

Existing shares, PCP.TO, closed at C$47.80 on Friday.  Shareholders of record as of September 13 will receive a special dividend of C$4.60 per share on September 14.

Shares to be issued about October 1 upon the reorganization of Canadian Pacific, owner of 85% of PanCanadian, closed at C$42.83 on Friday.  The "when issued" shares are in the name of PanCanadian Energy and trade in Canada under the symbol PCE.TO.  If the special dividend were the only substantive difference, one would expect the PCE shares to trade C$0.37 higher to match C$47.80 minus C$4.60.

PCX_w on the NYSE closed at US$27.30 on Friday.  At the same time the Canadian dollar traded down to US$0.6387 at the close on Friday.  Since far greater volume traded in Canada, one would expect PCX to be PCE times the exchange rate, or US$27.36.  In fact, the spread is only US$0.06.

The exercise described is only illustrative as the pricing relationships are constantly changing.  In a few days, the special dividend will no longer be a consideration and PCP.TO should trade very close to PCE.TO.  Meanwhile, most U.S. investors ought to be able to buy PCX very close to its Canadian equivalent, but traders and large investors will want to keep an eye on Toronto for any inefficiency. 

Excerpt from September 10, 2001; Meter Reader: Put Away Some Natural Gas