JSE-listed Blue Label Telecoms will issue American Depositary Receipts (ADRs) in the US in a bid to bolster its offshore investment base from the current 18% of shares in issue, 8% of which is held in the US.
The company will work through the Bank of New York Mellon (BNY Mellon), which will bundle 10 Blue Label shares together as one depository, and then offer the depository to US-based investors at a price that matches the value of the stock on the local bourse. Trade in the stock closed yesterday at 840c.
Investor relations head Michael Campbell explains that the company wants to expand its offshore investment base, but many American funds have a mandate not to invest in emerging markets. Bundling the shares together as depositories allows US investors to buy them, and BNY Mellon is a well-known and trusted name, he adds.
Bigger reach
Campbell says around a third of the top JSE-listed companies have ADRs and the move is not unusual. He says Blue Label has seen interest from US investors, and ADRs will help it grow its international investor base.
Mark Levy, joint-CEO, says ADRs "accelerate our efforts in diversifying and increasing our international shareholder base, and enhance awareness of Blue Label's principal operations in SA, the UK, Mexico and India".
Currently, about 18% of Blue Label stock is held internationally, 18% of which is in the hands of Americans, says Campbell. He adds that this is not a capital-raising exercise for the company, which will present its interim results tomorrow.
Blue Label has been listed on the JSE for nearly five years and ADRs are almost an evolution to expand its investor universe, says Campbell. He explains there are many types of depositories, but the company is only looking at the US for now.
"We look forward to helping Blue Label unlock the potential of the US investment community," says Lauren Czepek, VP of BNY Mellon in SA.
BNY Mellon has launched over 60 ADR programmes, including companies such as Sun International, Mr Price, Standard Bank, Pinnacle Technology Holdings and Ellies.
"Investor demand for African stocks is high. American investors buy ADRs rather than foreign ordinary shares as ADRs are 'wrapped' to be seen as local investments which institutional and retail investors prefer," explains Czepek.
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