The government’s move to authorize listed companies to participate in the issuance of non-capital-raising American depositary receipts, also known as Level 1 ADRs, may draw more than NT$100 billion (US$3.23 billion) in capital to the nation’s equity market in the long term, Citibank said yesterday.
The Financial Supervisory Commission (FSC) and the Taiwan Stock Exchange last month allowed the nation’s publicly traded companies to issue non-capital-raising depositary receipts that are traded on over-the-counter markets overseas, in a bid to improve the shareholder structure and liquidity of local listed firms.
“The Level 1 ADR program is the most cost-effective way for a foreign company to have its equity traded in the US and access the incremental pool of capital available for US dollar-denominated listings,” Beate Melten, global head of IR Advisory Depositary Receipt Services at Citibank, told a press briefing in Taipei.
Based on the issuance qualifications set by the government, 97 listed Taiwanese companies are qualified to file an application to issue non-capital-raising depositary receipts, but a listed company must be a component of the FTSE TWSE Taiwan 50 Index, the FTSE TWSE Taiwan Mid-Cap 100 Index or the GRETAI 50 Index to make such an application, the commission said.
In addition, the number of shares to be used as the underlying security of overseas depository receipts cannot exceed 10 percent of the total number of shares, according to the commission.
Eying the strong market potential of such debt issuance, Citibank has decided to strengthen the marketing of its depositary receipt services to Taiwanese listed companies.
The US financial services company currently manages more than 800 depositary receipts in more than 55 countries and has 61 percent of depositary receipt trading volume of Taiwanese issuers — the highest-ranking liquidity in the nation.
The group expects the first Level 1 ADR program by a Taiwanese listed company to debut in the first quarter next year.
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