Depositary Receipts Raise US$37bn for Non-US Companies

The market for non-US companies raising capital in depositary receipt (DR) form reached a significant milestone in 2014, with US$37.3bn in DR capital raised, reports Citi. The total represents the highest level since 2007 and is up more than three times from 2013 levels.

According to the group’s industry report, initial public offerings (IPOs) in DR form dominated issuance, representing US$32.8bn – or 88% – of the total, as DR IPOs rebounded in 2014, up five times from the prior year.

Chinese companies accounted for more than half of the year’s DR IPOs, driven by online e-commerce company Alibaba Group Holding, which raised more than US$25bn in the largest IPO in history. Follow-on offerings in DR form represented approximately US$4.4bn – or 12% – of the total in 2014, down 7% from 2013.

“The significant increase in depositary receipt capital raising and trading volumes shows that DRs are a beneficial vehicle for issuers and investors alike,” said Nancy Lissemore, global head of depositary receipt services at Citi. “And with countries such as India and Taiwan embarking on DR regulatory changes to expand investor access, we see a lot of opportunity for growth.”

Notable DR Market Highlights of 2014:

  • Capital raising transactions from 18 different countries, including China, Russia, Colombia and Brazil, increased in terms of dollars raised and number of deals.
  • The top five issuers in terms of DR capital raised were Alibaba (US$25bn), (US$2bn), Grupo Aval (US$1.2bn), Oi S.A. (US$1.1bn) and Lenta Ltd. (US$1bn).
  • The communications, consumer (cyclical), and financial sectors accounted for approximately 91% of the total capital raised.
  • DR trading volumes were up 8.7bn shares, to 152bn shares, versus 143.3bn shares in 2013, driven by higher volumes in Asia and Latin America. Since 2006, overall DR trading volumes have grown at a compound annual growth rate (CAGR) of 9%.
  • The number of unsponsored DR programmes has increased to more than 1,600, with volume up 56% from 2013.
  • Investor demand remained strong, with US investment in non-US equities rising to US$6.6 trillion during Q3 of 2014, up 10% from US$6 trillion in the same quarter of 2013.

Notable Regulatory Highlights of 2014

As many regulators look to facilitate growth in local markets through the increased investor demand for international equities, 2014 saw numerous developments aimed at increasing access to depositary receipts.

In India, the MS Sahoo Committee advised easing depositary receipt regulations to allow the creation of over-the-counter (OTC) Level I American Depositary Receipts (ADRs) in both sponsored and unsponsored form. Taiwan followed through with similar proceedings to allow the creation of OTC traded non-capital raising DRs.

Officials in Romania modified regulations to allow local exchange listed companies to utilize DRs in the EU for secondary offerings and non-capital raising listings.

Further details on 2014 DR highlights can be accessed via the 2014 Year End Report on the Citi DR website:


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