Questions about AXXIY:OTCQX, page-6

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dej

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20/05/15

07:36

Post #: 15312228
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Originally posted by dej ↑

I'll be awesome an explain. Hump day for everyone. Lets all get over it together.

And I also like that nzdude wants to know. I am also from NZ, now in Aus and on way to UK now. Hard to be a NZ'er on a AUS stock forum. Although this is the first time I have said I am...

Anyways;

AXXIY are 40:1 ADRs.

ADRs are American Depositary Receipts and are basically a way of holding foreign companies in the US without having to pay for all the accounting problems you will have with tax etc. So each ADR is 40 AJX.AX shares (all in US dollars). So they have followed the price of AJX.AX because people will buy them when there is an arbitrage oppourtunity, keeping them in sync with one another. Also, ADRs will also pay our dividends if the company ever gets to the stage and also convert it into USD for you. So as you can see, they basically just make it easy.

Given they are just holding a portion of AJX.AX shares, the do not add to the market cap of AJX.

The ADRs are on the OTCQX market which is the upper tier OTC market. More information on this here:
http://www.investopedia.com/terms/o/otcqx.asp

I would say on a NYSE listing they will delist the ADRs and pay them out in NYSE stocks instead. Again this is something for the investment banks and finance department of AJX to sort out. Either way, if you hold the OTC shares or AX shares you will be equally looked after given the underlying asset is the same.

Give you an example of how they are calculated in price:

AJX = 61c
40 x 61c = $24.4 AUS

ADRs are in US:
@ 1 USD -> 1.236 AUS (0.79 USD/AUS)

Therefore:

40 AJX.ADR = $24.40 x 0.79 = $19.31 USD

Current AXXIY.OTCQX = $19.5 USD.

Two-tenths-of-f**k-all of an arbitrage oppourtunity there, so basically equally priced.

Also depends on FX rates. Banks usually operate on a spread so you wont get the exact same as the quote price.

Also quite a spread in the bid and ask anyways; 19.13 / 19.52. The price I calculated above is basically slap-bang in the middle.

Regardless, hope this helps.

Reply if you want any more information

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I would also like to stress that these ADRs are for the convenience of US citizens, not us. So as an Aussy/NZR/anything other than a citizen of the ADRs exchange country, buying an ADR would just complicate things, not make them easier for you. You would lose out on two exchange rate conversions, plus everything else that you accountant will pull his hair out about.

Last edited by dej: Shocking Spelling 20/05/15

AJX Price at posting: 61.0¢ Sentiment: Buy Disclosure: Held
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