One of the key dividends from launching the Bangabandhu-1 satellite through SpaceX’s Falcon 9 rocket is the promotion of Bangladeshi businesses in the international community.
As I was discussing the investment opportunities in Bangladesh last week with a leading management consulting company, it was truly exhilarating to know that global business community recognizes this event as a symbol of stability in the Bangladeshi government.
Dodging, back to back, a potential civil war (the BDR mutiny in 2009) and a regional war with Myanmar, shows the signs of strong leadership. The private sector should now bank on the launching of Bangabandhu-1 and reap the benefits of the boost in our global reputation it is bound to incur.
Last year, while I was assessing the likelihood of Nasdaq listing for Bangladeshi companies with Rebecca Victoria Smith, head of listings Nasdaq Asia, we agreed that Bangladesh has tremendous potential in the emerging economy.
From the table above we can see that a stronger capital market produces a higher per capita number. A calculative strategy to navigate through this will eliminate hyper-inflation and, in turn, could create more universal economic improvements for the country
The goal is to allow Bangladeshi businesses access to the global capital market, and also have global business partners who have an interest in the economic health of the country. To make this happen, one of the possible solutions I would like to suggest to Bangladeshi enterprises which are already listed with the DSE, is to consider the American Depository Receipts (ADR).
I find American Depository Receipts can prove to be a better solution now without going for a direct listing on international exchanges.
A foreign company’s share can be traded on American stock exchanges without direct listing. This process is called American Depository Receipts (ADR). Under the Securities Act 1933, ADRs are issued by a depositary against the deposit of the securities of a foreign issuer.
Before I discuss more on ADRs, let’s analyze Bangladesh and some of our regional competitors’ marketsize, growth, valuation, performance, and foreign activity, which are important determinants for investment from the developed countries.
This shows that it’s important for Bangladeshi policy-makers and industrialists to start creating strategies around accessing capital through equity sharing over debts. So let’s discuss the pros and cons of ADRs.
Pros:
- Lowering debts
- Obtaining better financing opportunities and extending their debt maturity
- Wider shareholder base
- Global offers expand demand and reduce the price pressure
- Product market reputation
- Access to more liquid markets
- Exemplifies increasing trend and advances in technology
- Additional visibility in the US investment community and resources for investor relations support
Cons:
- Many private companies fear losing control over the management of the company and try to avoid the ultimate challenges that will come from international savvy investors
Without question, the benefits outweigh any and all disadvantages. I would recommend that ambitious business executives in Bangladesh, who have already gone public, to consider ADR and take advantage of the benefits discussed earlier.
I would caution them to have a strategy prior to starting and to first hiring top management consultants to negotiate the deal for them. These consultants will find big banks who can purchase their company stocks and sell them to their investments clients successfully.
Mazher Mir is a financial advisor for Morgan Stanley, USA.
