If you look up the price of “BHP”, the Australian-based listing of BHP Billiton, you will see a price of $47.03. If you then look up the price of “BBL”, the British-based listing of BHP Billiton that trades on the London Stock Exchange, you will see a price of $44.08 per share. Given that they represent a claim on the exact same mining and resource assets, you may wonder why there is a $3 per share difference for something that tracks the same asset.
The answer has to do with franking tax credits. Australian companies often “frank” their stocks, which means they attach additional money to dividend payments so that shareholders don’t have to pay taxes on their dividend payments. Once a dividend is fully franked (or 100% franked), you can own the Australian stock without having to pay a dividend tax on the dividend payments. However, franking is something that must be done on a per share basis, so BHP Billiton’s Australian shares engage in a policy of franking at the highest possible tax threshold.