Trading Tech Stocks on International Stock Exchanges

March 31. 2019. 8 mins read

Trading tech stocks on international stock exchanges not only expands your investing universe but also provides a much-needed diversification effect which helps offset the inevitable volatility you’ll face when investing in any disruptive theme. In a recent article, we talked about two stocks – Elixinol and Charlotte’s Web – which offer investors exposure to the popular cannabidiol (CBD) investment theme which is all the rage these days. In that article, we noted that each of these two stocks offers a distinctly different investment profile because they trade on two different international stock exchanges. This means you need to purchase each stock using a different currency as seen below:

  • Elixinol (EXL:AU) – Trades on the Australian Securities Exchange using Australian dollars (AUD)
  • Charlotte’s Web (CWEB:CN) – Trades on the Canadian Securities Exchange using Canadian dollars (CAD)

Let’s say you’re an American investor who owns both of the above stocks and the value of the U.S. dollar falls sharply. You’ve just hedged yourself by holding two foreign currencies in your portfolio that will increase in value if the U.S. dollar falls – all things constant. Since all three countries – United States, Australia, and Canada – will experience varying degrees of economic success over time, having exposure to all three markets and currencies lowers your overall risk and increases your diversification. We’ve known for decades that international diversification is a good thing, but most investors fail to invest any of their assets internationally. This behavior is so irrational that it is one of the Six Major Puzzles in International Macroeconomics.

The Equity Home Bias Puzzle

It’s called the “equity home bias puzzle” and what it means is this. Despite the fact that we’ve known for decades that international portfolios offer better diversification for investors, most investors hold nearly all their wealth in domestic assets. Think about your own portfolio for a minute. How many international assets do you hold? For most people, the answer is probably very few. This is because people are more likely to invest in what they find in their own backyards. “I see lots of people in the drive-through at McDonald’s every day so it must be a good stock,” is the sort of mindset that accompanies domestic bias, something especially prevalent among retail investors. (That may not be the best example since McDonald’s is a multinational firm that derives revenues from all over the globe, but you get the idea. We like to invest in things we know.)

In order to combat domestic bias, you need to invest in foreign assets. While we’d like to think that most investors would be prudent and find some good global ETFs with lots of assets under management, that’s too boring for most. That’s why investing in disruptive technology themes always attracts so many new investors. As long as you stick with the principles of diversification – no more than 5% of your assets in any single stock sort of thing – there’s no reason you can’t look at investing in foreign technology stocks that are a bit more exciting than ETFs. You might be apprehensive because foreign stocks sound riskier, but in many cases it’s no more risky than investing in U.S. listed stocks. But it is more complicated.

International Stock Exchanges

In order to better understand the world’s stock markets, we can turn to the World Federation of Exchanges (WFE) which is “the global industry group for exchanges and clearing houses (CCPs) around the world.” WFE exchanges are home to nearly 48,000 listed companies representing more than $70 trillion in market cap. The vast majority of these stocks trade through the below member exchanges:

A list of major international stock exchanges
A list of major international stock exchanges – Source: WFE

Every one of these stock exchanges differs in respect to the rules and regulations they need to adhere to which will depend on the host country and the companies that operate the exchanges. Ideally, we’d like to see exchanges that are “tiered” such that companies can enjoy unfettered growth in the early stages while slowly advancing towards the more regulated environment that accompanies a major listing. This was supposed to be the purpose of the Over-The-Counter (OTC) market, but it has failed miserably in the respect. Some international stock exchanges that seem to be getting things right can be found in the Nordics, a region that’s renowned for being innovative.

Innovation in the Nordics

Since most Americans think that Luxembourg is a city in Germany, let’s start with a quick geography refresher. While the term “Scandinavia” usually refers to three countries – Denmark, Norway, and Sweden – the term “Nordics” refers to Denmark, Norway, Sweden, Finland, and Iceland, and their associated territories. The Nordic region is particularly interesting for disruptive technology investors because there’s a whole lot of innovation coming out of there. Incredibly, three of the top-10 most innovative countries in the world last year were Nordic countries – Sweden, Finland, and Denmark.

The 10 Most Innovative Countries
The 10 Most Innovative Countries – Source: Global Innovation Index 2018

For foreign investors, investing in Nordic technology stocks provides added diversification from the underlying currencies to the varying geographical risks to the differing market risks. One European stock exchange operated by Nasdaq Inc. which lets you access high-growth Nordic companies is called “Nasdaq First North.”

Nasdaq First North

While most people might associate Nasdaq Inc. (NDAQ) with the main NASDAQ stock market, the company actually has a number of European stock exchanges as well. To clear up the confusion:

  • NASDAQ – The word is in CAPS and denotes the second largest stock exchange in the world behind the New Yawk Stock Exchange (NYSE) with more than 3,000 companies listed
  • Nasdaq Inc. – The use of the word “Inc.” denotes a $14.4 billion global financial services company that operates the NASDAQ stock exchange along with at least eight more European stock exchanges that are largely in the Nordic region.

One of the stock exchanges offered by Nasdaq Inc. is an alternative exchange called Nasdaq First North which is a platform that allows emerging growth companies to access capital from a large pool of sophisticated retail investors who expect that the stocks being traded have been sufficiently vetted by the exchange. From the company’s website:

A company can join Nasdaq First North regardless of the country of origin or industry sector. A key factor for success is that there is investor interest for the company’s share. The Nordic region boasts the largest retail presence in the world per capita, with small private investors and professional investors taking an active role in the market.

In order to initially list on the exchange, companies must meet with a Certified Adviser who will help them through the initial approval process and then ensure that the company fulfills the requirements of Nasdaq First North on a continuing basis. The approval process takes about 2-3 months and involves some proper due diligence.

First North Onboarding Process
First North Onboarding Process – Source: Nasdaq First North

That’s a whole lot more structure than you see on the OTC market where companies can simply perform a “reverse merger” using some worthless shell company they bought and then start using stock promoters to pump up the share price. The above process serves to filter out all the junk. What’s leftover is a market that has a long tradition of trading growth companies which contributes to a highly liquid and very visible market.

There are about 260 companies trading on the Nasdaq First North exchange, many of which are developing all the innovation that’s coming out of the Nordic region. Over time, successful companies will then migrate up to the next tier – “Nasdaq First North Premier”:

Nasdaq First North vs. Nasdaq First North Premier
Nasdaq First North vs. Nasdaq First North Premier – Source: Nasdaq Inc.

Finally, they’ll up-list to the Nordic Main Market which means increased investor interest from institutions and fund managers. According to Nasdaq Inc., “on average, more than five companies grow and transfer to the Nordic Main Market each year, most of which come from the Premier segment, and the experience gained on Nasdaq First North is valued.”

All International Exchanges Differ

The Nordic region represents just one place that technology investors might look for international technology stocks. Each of the many international stock exchanges out there differs in their listing requirements, their reporting requirements, and the fees which they charge for transactions. In the case of Nasdaq First North, they’ve managed to create a well-functioning market that serves the same purpose the OTC market was intended to serve – a platform for small companies to raise capital from a large retail investor base. Contrast that to the trash stocks you see trading on the OTC market that manage to frequently fleece retirees of their nest eggs.

You won’t find any shell companies trading on the Nasdaq First North, but you also won’t find any standardized financial reports. Out of all the stock exchanges in the world we’ve looked at, none provide the quality of financial reporting that you see at the large American stock exchanges. What you’ll often find on international exchanges are less-than-ideal methods of reporting financials (think PDFs with CAPTCHAs.) For many of the companies we’ve looked at that trade on Nordic exchanges, you’re stuck with company-issued financials in PDF files you can download. They won’t be structured in the same way, and some won’t even be published in English. The point is, every single exchange around the world is a completely different animal.


It’s becoming increasingly difficult for companies to grow revenues and increase margins which is why many are turning to technology for an answer. The same is true for investors, who also need to look for alpha in new places. In this case, foreign technology stocks are low-hanging fruit that provide an immediate diversification effect and access to innovations that may be flying under the radar (in other words, tech stocks that trade at more reasonable valuations). Since not all foreign exchanges are created equal, we not only need to examine the merits of international stocks we invest in, but also the underlying exchanges they trade on. Exchanges like Nasdaq First North appear to have a structure in place that filters out most of the pretenders leaving investors with a collection of legitimate companies looking to raise capital from a large pool of retail investors. Investing in microcaps is risky enough, and we don’t want to sift through a bunch of OTC scams to find a diamond in the rough.

Recently, one of our readers turned us on to a Swedish 3D bioprinting stock that trades on the Nasdaq First North exchange. The company has been experiencing strong revenue growth, they’ve established some major partnerships, and just last quarter they made their first acquisition. They’re kind of what we had hoped Organovo would look like today, and they just might be a good way for technology investors to get exposure to both 3D bioprinting and the Swedish krona, all in one fell swoop. In our next article, we’re going to look at “A 3D Bioprinting Stock That’s Not Organovo.”


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    1. We’ve traded a fair number of stocks using IB and usually answer questions like this by seeing if we can actually buy any given stock. You have to receive individual permissions for every exchange you want to trade on with IB so it’s a bit of a pain, but feasible. To answer your question, we believe so. We’re investors in CELLLINK (now Bico Group) which is traded on the Nasdaq First North.