Depositary Receipts Set Record for IPOs

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Initial public offerings in the form of depositary receipts rose more than 75% in 2006 from a year earlier to a record $20.9 billion, according to a year-end analysis by Citigroup. The previous record of $17.1 billion was set in 1994 and was nearly matched by the $16.9 billion total in 2000.

"A receptive investor market, a rally from the mid-year global market downturn, and liquid trading conditions were major drivers of the surge in DR IPOs overall," says Nancy Lissemore, managing director of depositary receipt services for Citigroup Corporate and Investment Banking.

The recent trend toward London and Luxembourg listings is continuing, Lissemore says. Nearly 81% of last year's total raised through primary offerings was in the form of global depositary receipts, or GDRs, listed in these European financial centers, as against only 19% listed on US exchanges. "The balance has shifted from 2000, when 89% of DR IPOs from non-US companies were listed on US exchanges," she says.

GDRs are DRs issued simultaneously in two or more markets through a global offering.

Russian oil company Rosneft's $6.4 billion IPO in GDR form in July 2006 was the largest DR capital raising in history. The issue was listed on exchanges in Moscow and London.

The total year-to-date 2006 capital raised in DR form, including primary and secondary offerings as of December 12, was $28.2 billion, a 3% decrease from the full-year 2005, according to Citigroup's report. A record $30 billion of IPO and follow-on offerings combined was raised in 2000.

The US Securities and Exchange Commission took several actions of potential significance to non-US issuers at its open meeting on December 13, according to Citigroup. These actions included interpretative guidance regarding the implementation of section 404 of the Sarbanes-Oxley Act and a revised rule proposal relating to foreign issuer deregistration.

The SEC voted to propose for public comment measures to improve implementation of Section 404, with the comment period open until February 26, 2007. …