Richemont’s share price jumped by more than 900% on Wednesday, which might have caught many investors off-guard.
The company announced on 17 March 2023 that it would terminate its depositary receipt (DR) programme in South Africa.
A depositary receipt allows a company like Richemont to offer its Swiss shares on an offshore exchange like the JSE without registering a direct listing on that exchange.
A depositary receipt on the JSE, therefore, represents shares in an offshore exchange – in this case, the SIX Swiss Exchange.
By using depositary receipts, local investors can hold international shares like Richemont without transacting in the offshore exchange.
The actual shares would be held by a bank which then offers the DRs based on the number of shares held. These DRs can then be sold on the JSE.
Richemont terminated its depositary receipts on the JSE and replaced them by listing A-class shares locally as a secondary listing. The primary listing remains the SIX Swiss Exchange.
As part of the change, Richemont depositary receipt holders were able to exchange 10 DRs for 1 Richemont class A share on the JSE.
This caused the share base to shrink nine times, which is reflected in the 900% increase in the Richemont share price on the JSE.
Simply put, the share base was shrunk so that one share represents a larger portion of the company.
Richemont share price on the JSE
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