Royal Dutch and Shell Case

1946 WordsOct 10, 20148 Pages
Group members: Eltaj, Sadraddin, Dilsad, Renata, Vugar, Jaheed, Senan CASE STUDY #2 INTRODUCTION High Street Global Advisors, a global investment management organization is trying to understand the opportunities presented by the Royal Dutch/Shell pricing discrepancy. This case analyzes the benefits of shares of two twin companies Royal Dutch and Shell. Royal Dutch trades are more actively in the Netherlands and U.S. markets, whereas Shell trades are more actively in the United States. They are getting price benefit mainly from arbitrage opportunities arising from daily stock price difference between the prices of twin equities that cross-listed in different European stock markets. For example, a U.S. (Dutch) investor can buy Royal…show more content…
exchange. Level 3 ADRs are able to raise capital and gain substantial visibility in the U.S. financial markets. Why companies might find it attractive to issue ADRs? To expand their share holder base To acknowledge that US share holders are important to them and to create a vehicle that makes it easy for them to hold, trade and settle those securities, The advantages of ADRs are twofold. For individuals, ADRs are an easy and cost-effective way to buy shares in a foreign company. They save money by reducing administration costs and avoiding foreign taxes on each transaction. Foreign entities like ADRs because they get more U.S. exposure, allowing them to tap into the wealthy North American equities markets. Why would investors be interested in the method of raising equity capital? From an investors point of view it’s more transparent, equity exposures are transferred to English and money is transferred in dollars without much of processing troubles. It creates more poles of stocks. Creates greater global stocks/equity. Banks Create a deposited agreement which would make the security available in the US and that security become freely tradable for US investors. Risks, Political Risk: The instability of home country who issues ADR affects the ADRs. Exchange Rate Risk: as we know that ADR shares track the shares in the home country and if a country’s currency is

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