ADR REPORT - Emerging market highlights - Nov. 18
Reuters, Wednesday, November 18, 1998 at 19:36
TELEBRAS (NYSE:TBR) SHELL UP 400 PCT IN ARBITRAGE-FUELED RISE
By Ian Simpson
NEW YORK, Nov. 18 (Reuters) - The shell of Telebras SA
(SAO:TELB4) rocketed in heavy trade Wednesday amid likely
investor confusion about the broken-up Brazilian telephone
company.
Telebras was up 5/32 to 7/32, easing from an intraday high
of 1-1/2.
Telebras, the most widely held American Depositary Receipt
(ADRs) in the United States, was broken up into 12 companies in
a $19 billion privatization in July.
The dozen spinoffs began trading as American Depositary
Receipts (ADRs) on a when-issued basis Monday. They launched
into regular trade Wednesday, leaving Telebras as a shell
company with only a handful of assets and priced at 1/16.
Traders and analysts said Telebras was being driven up in
part by arbitrage, or exploitation in differences in price,
between the company's shares on the Sao Paulo exchange and the
ADRs.
There also likely was a misunderstanding about the role of
the shell company in the wake of the spinoffs, with some
investors still believing they were buying telephone assets.
"That ain't no phone stock out there. It's an old sofa," a
trader said.
Carlos Constantini, a telecommunications analyst for
Paribas in Sao Paulo, said the Telebras shell still had some
assets. They included real estate and equity in companies, such
as a 1 percent share in Portugal Telecom (LIS:PTCO) (NYSE:PT).
However, the assets would have to be sold off to pay
severance for Telebras employees and other expenses,
Constantini said.
Telebras likely would have no assets left by the third
quarter of 1999, when the government plans to shut the company
for good.
Telebras "is something that is destroying value every
single month, because there are only outflows," he said.
William Beavington, a Paribas telecommunications analyst
who joined Constantini in a telephone interview with Reuters,
said, "It's a highly speculative security. I would hesitate to
call it a stock."
He added, "It's quite likely there is a great deal of
confusion about what exactly Telebras is."
Among the Telebras spinoffs, Tele Centro Sul (NYSE:TCS) rose
4-3/16 to 49-13/16 and Tele Celular Sul (NYSE:TSU) was up 1-1/16
to 14-3/16. The two ADRs were among percentage-gain leaders on
the New York Stock Exchange.
The ING Barings Latin American index of leading regional
stocks <.LAT> was up 1.11 percent.
Copyright 1998, Reuters News Service |
