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Monday, 24 August 2020

Egypt’s PHD to write off LSE-listed GDRs

PHD to write off its LSE-listed GDRs: Palm Hills Development’s (PHD) extraordinary general assembly has approved canceling its London Stock Exchange-listed global depository receipts (GDRs) program, the company said in filings to the EGX (pdf) and LSE on Wednesday. Data on the GDRs show an unchanged 52-week range, implying the GDRs are thinly traded. PHD had launched the program on the LSE in tandem with its IPO on the EGX in 2008. At the time, the company said it would sell 63.4 mn shares as GDRs.

The cancellation is largely because of low trading volumes and it makes little sense to continue paying fees to maintain the GDR program amid low liquidity, Mamdouh Abdel Wahab, PHD’s investor relations and investments associate vice president, told Enterprise. The number of GDRs traded on the LSE represent less than 1% of the company’s 3.1 bn total shares, Abdel Wahab noted. Maintaining a GDR listing also requires IFRS compliance, which means appointing auditors in several jurisdictions, and potentially overloading the finance team, added Abdel Wahab.

PHD’s decision to scrap its GDRs comes one month after the Arab African International Bank purchased a 12.25% stake in the company. Since the bank’s arrival at the shareholders’ table, PHD’s share price has risen nearly 8%. This includes a 2% uptick yesterday following the announcement that the company is canceling its GDRs.

What are GDRs anyway? Think of them as a way for investors to indirectly invest abroad — without having to actually touch a foreign stock exchange. They’re fundamentally bank certificates representing shares in a company outside the jurisdiction in which they’re issued and sold. Investors can simply go to a financial institution in their home country and purchase GDRs without needing to directly buy the shares on the (usually emerging market) exchange on which the shares normally trade. Over a dozen EGX-listed companies have GDR programs — including CIB, Edita, Telecom Egypt, GB Auto, and Orascom Investment Holding. London has been the most popular destination for such programs.

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