Treasury mulls helping dual listing of SOEs
The Treasury is considering facilitating and recognising dual listing for listed firms ahead of going public with State Owned Enterprises (SOE) next year to make them more attractive, Treasury sources say.
Dual listing means a listed firm going public on another (international) exchange.
Dual listing will be facilitated by the Treasury acknowledging foreign exchanges as qualifying exchanges for firms to go public in. Then listed SOEs can issue American Depository Receipts (ADR) and Global Depository Receipts (GDR) which are certificates issued by a bank (international) which purchases shares of the SOE. Sources said that the Treasury is examining this in detail.
With these certificates, SOEs will be able to obtain financing and liquidity without having to sell down government holding, according to analysts. ADR is a financial instrument that uses pledged shares as the underlying asset. “The shares are structured as trading instruments and sold as an ADR on the US markets. These structured instruments are long-term if not perpetual in nature. Exchange outflow would occur once the instrument is unwound and liquidated back into the local market,” an official told the Business Times. These shares are never actually sold and can only be sold if the instrument is unwound at a later date. The Treasury could include a buy back if the structure was ever unwound, as a result allowing the government to benefit from the US capital markets without having to sell their shareholdings, an analyst said. By issuing these for SOEs, Sri Lanka will see an initial cash inflow into the country, according to industry officials.