Capital raising through GDRs in London slumps as global market triples

Chinese interest boosts US markets while decline of London-oriented Russian companies is blamed for growing dominance of ADRs

Capital raising via global depositary receipts (GDRs) slumped in London even as the overall market for depositary receipts grew, raising concerns that GDRs are in a longer-term decline in the city.

Only three companies raised capital through GDRs in London last year for a combined total of $1.35 bn, the Financial Times reports, citing data from Dealogic. That is down from a peak in 2005 of 35 companies raising $19.5 bn through GDRs.

At the same time, American depositary receipts (ADRs) were used in the US by 45 groups to raise a combined $35.82 bn, the highest so far this century, the newspaper said.

Globally, companies from 19 counties carried out 56 capital raisings last year that raised more than $38 bn – more than triple the level of the previous year and the highest amount since the financial crisis in 2008 – according to data from BNY Mellon.

Anthony Moro, head of the depositary receipts program for EMEA at BNY Mellon, told the FT that Chinese tech companies are attracted to the ADR market and, as giants such as Alibaba and Baidu expand, they are also buoying the US market.

Depositary receipt capital raising last year was led by Chinese firms, according to data from BNY Mellon. Chinese tech companies Alibaba, Baidu and Qihoo were among the top five in terms of capital raised, with Alibaba alone raising a record $25 bn.

Moro says the US JOBS Act, which reduced reporting requirements for foreign companies, partially account for the interest by Chinese tech companies, as well as others from Europe.

Another factor in the decline of GDRs in London may be the slowdown of the Russian market amid fighting in Ukraine and western sanctions. Moro says the city has traditionally been the top choice for Russian companies seeking to raise capital abroad. Russian hypermarket chain Lenta was the main capital raiser via GDR’s last year, with an issuance in February totaling $950 mn and accounting for the majority of capital raised in London in 2014.


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