SM Investments Corp., the flagship company of the SM group of taipan Henry Sy, has rolled out in the US market an entry-level American depositary receipts program.
This allows US investors to trade instruments, with equity in the Philippines’ largest conglomerate as the underlying asset.
Under the program launched through The Bank of New York Mellon, ADR securities issued in the US representing SM common shares can be traded over-the-counter under the ticker symbol SMIVY.
One SM ADR represents 0.5 common share of SM, the conglomerate announced Monday night.
“We are delighted to work hand in hand with BNY Mellon through this sponsored ADR program which aims to actively engage and support global investors. This initiative affirms SM’s desire to reach out and better service the needs of more investors at a time when interest in the Philippines among US investors is fast building up. SM is widely regarded by international investors as a strong proxy for the Philippine growth story and we believe that it will continue to be an attractive investment proposition,” Jose Sio, SMIC chief financial officer said in a statement.
ADRs refer to negotiable certificates issued by a bank in the US that serves as a proxy to a specified number of shares in a foreign stock that is traded on the stock exchange.
They are denominated in US dollars, with the underlying security held by a US institution.
Such an instrument is deemed as a good option to acquire an interest in a foreign company while collecting dividends and capital gains in US dollars.
SMIC said this facility serves the following purposes:
It allows US investors to trade SM common shares in their own time zone and to settle their transactions locally. As such, it offers convenience and reduces currency risk on the part of the investor as they acquire the ADR in US dollars.
It opens for SM the door that leads to a large pool of US ADR investors, thereby potentially diversifying and broadening SM’s shareholder base.
It enhances corporate visibility and global presence.
What SM Investments created is a “level 1” or entry level ADR program. This is the simplest form of sponsored ADR, which means that it is a non-capital raising activity and SMIC will not get the benefit of listing on the US stock exchange. However, its ADRs can trade over the counter and there are no reporting obligations to the US stock exchanges.
On the other hand, a “level 2” ADR is also non-capital raising but allows the issuer to attain full listing on the US stock exchange, which means it has to comply with reportorial obligations.
“Level 3” is the capital-raising exercise, which means that the issuer is selling ADRs to get new money. It gets the benefit of listing and its security treated like that of any mainstream US company, subject to reportorial obligations.
BNY Mellon is the world’s largest depositary for ADRs and global depositary receipts.