- Managing dividend exposure
- Float acceptances and the postal acceptance rule
- Recent trends in the issuance of ADRs
Managing dividend exposure
A change in the level of dividend payment has an impact on the prospects of capital appreciation of a company's share and the value of derivatives linked to the share. This article explains the instruments that an investor can utilise to hedge against such risks. They are:
- dividend swaps which are an exchange of dividends paid on individual or basket of different shares for periodic payments linked to some other asset;
- strike-back options which permit the holder (whether of call or put options) to reverse the option transaction by paying the strike price in exchange for the underlying shares at any time during the term of the option; and
- unbundling the dividend rights from the other rights attached to the shares via the issue of different classes of units backed by the same parcel of shares.
Float acceptances and the postal acceptance rule
This case note discusses the recent decision of Hedigan J in Ronay Investments Pty Ltd v Pinnacle VRB Pty Ltd where the postal acceptance rule was invoked in the context of an acceptance by shareholders of an offer in a prospectus. (Eds: This case was reported in ITM No. 1). The author submits that Hedigan J was in error when his Honour ruled that the lodgment instructions in the prospectus that the offer should be forwarded "...so as to reach" the share registry of the company did not exclude the operation of the postal acceptance rule. In the author's view that phrase carries the meaning that acceptances are required to arrive at the prescribed destination to be effective and not merely to be posted within the prescribed time.
(Source: T Noble, "Share Offerors Beware the "Postal Acceptance Rule"!", (2001) 19 Co & S LJ 120)
Recent trends in issuance of ADRs
The ways to expand the investor base by means of American Depositary Receipts (ADRs) are the subject of P Ali's article entitled "American Depositary Receipts, and Expanding the Investor Base and Acquisition Appetite of Australian Listed Companies". ADRs are US dollar denominated negotiable instruments evidencing beneficial interests in securities issued by a company listed outside the US. They can be traded on both the US stock exchanges and the private over-the-counter securities market. ADRs are often issued to broaden and diversify the investor base and enhance the profile of the company in the US. There are 5 types of ADR programmes:
- unsponsored;
- sponsored level I;
- sponsored level II;
- sponsored level III; and
- private placement.
Both unsponsored and sponsored level I programmes are not listed on the US stock exchange. Sponsored level I and II programmes are issued to increase secondary trading in the securities amongst US investors and not to raise capital. Level III and private placements are used to raise capital in US securities markets. The article also examines the recent trends in the use of ADRs by non-US companies as consideration for the acquisition of US targets.
(Source: P Ali, "American Depositary Receipts, and Expanding the Investor Base and Acquisition Appetite of Australian Listed Companies", (2001) 19 Co & S LJ 11
