Non-US equity demand continued on an upward curve as global issuers raised $10.4 bn in depositary receipts during the first half of 2019 – an increase of 25 percent from the first half of 2018 – with the rise in capital raising driven primarily by increased activity in the Asia-Pacific region.
According to a report from Citi Depositary Receipt Services, the rise was driven primarily by increased activity in the Asia-Pacific region, with total capital raisings of $8.1 bn – around 78 percent of the total pool – compared with $6.5 bn in the first half of 2018.
Depositary receipts follow-on offerings increased 125 percent to $6.1 bn, representing 58 percent of the total capital raised in 2019.
China-based issuers raised a combined $6.6 bn, accounting for 63 percent of the total.
Among these, Huatai Securities, a Nanjing-based financial services company and pilot client of the Shanghai-London Stock Connect, raised $1.7 bn in its June IPO – the largest depositary receipts IPO in 2019.
Furthermore, Pinduoduo, a Chinese e-commerce platform, conducted a $1.6 bn follow-on offering – the largest secondary offering in the first half of 2019.
The trend has been boosted by Emerging Growth Companies (EGCs) raising capital continuing in the first half of 2019, with eight of 10 China-based issuers choosing to come to market using depositary receipts via the JOBS Act to raise capital.
Enacted in 2012 to assist small emerging companies to access capital in the US, the JOBS Act modified capital raising regulatory requirements for a new category of issuer called an EGC – defined as an issuer generating less than $1.07 bn in gross annual revenue, whether the company is US-based or from elsewhere.
Of the JOBS Act IPO depositary receipts deals in the first half of 2019, EMEA-based issuers accounted for approximately 40 percent by number of deals.
Nancy Lissemore, global head of depositary receipt services at Citi, says in a statement: ‘The continued growth of depositary receipts capital raising activity demonstrates that the depositary receipts structure remains an attractive vehicle of choice for issuers to access financial markets.’
In terms of sectors, the internet and oil and gas sectors accounted for 44 percent of the total trading value.
