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7 Latin Stocks Could Be Delisted in U.S.

Declining share prices mean the firms don't meet requirements for the NYSE or Nasdaq.

November 29, 2002|Andrew J. Barden | Bloomberg News

MEXICO CITY — Grupo Iusacell and at least six other Latin American companies may be about to lose their listings on U.S. stock markets because of declining share prices.

Investor interest in Latin American shares has waned amid currency devaluations, political unrest and a regional economic slump.

Losing a listing in the U.S., where the shares trade as American depositary receipts, would shrink a company's pool of shareholders because many U.S. investors probably wouldn't make the added effort, and take the added risk, to buy the stocks in their home markets.

"Having the ADR listing means it is more attractive," said Graham Makohoniuk, who manages $650 million in Latin American stocks at Globalvest Management Co. in St. Thomas, Virgin Islands. "It tells us more people are looking at the company, and for our exit strategies, it gives us many more options."

Companies from Mexico to Chile began listing on the New York Stock Exchange and Nasdaq Stock Market in the 1990s, when the region's economy was growing and investment there was soaring.

Of 108 Latin American companies with shares trading on U.S. markets, seven currently don't meet listing requirements, according to Bloomberg data. Those include Grupo Iusacell, Mexico's third-largest mobile phone company; Net Servicos de Comunicacao, Brazil's biggest cable-television operator; and Corimon, a Venezuelan paint maker.

The others are Madeco, a Chilean copper company; Brazilian long-distance firm Embratel Participacoes; Supermercados Unimarc, a Chilean supermarket company; and Empresas ICA Sociedad Controladora, a Mexican construction firm.

The number is eight if Florida-based America Online Latin America Inc. is included.

Of the eight, all trade on the NYSE except Net Servicos and AOL Latin America, which trade on Nasdaq.

Companies can lose their listing on the NYSE for a number of reasons, including if their average global market capitalization drops below $15 million or if the average closing price of the shares is less than $1 for 30 consecutive trading days.

Nasdaq has similar listing rules.

Madeco is considering swapping current shares, which trade for 33 cents each, for new shares via a so-called reverse split, which reduces the total shares outstanding and boosts the price.

"We want to maintain our commitment with U.S. investors," said Jorge Tagle, chief financial officer of Madeco. "One option is a reverse split, and we are studying all the alternatives in order to maintain our listing."

Trading in Latin American shares has declined this year even as overall trading on the NYSE has climbed.

The value of trading in Latin American equities for the first 10 months of the year was $58.9 billion, compared with $82.9 billion last year and $141.4 billion in 2000.

A U.S. listing is the only window left for many Latin American firms to raise funds, some investors said. Private financing has dried up as global investors seek higher potential gains in Asia and other regions.

Investment in Latin America soared in the 1990s as international companies sought to tap into the region's growth. Since then, concerns about government debt defaults, currency devaluations and corporate bankruptcies have boosted borrowing costs and cut investment.

For companies such as Corimon, keeping a U.S. listing is critical as the company's home market slumps. The value of daily trading on the Caracas Stock Exchange has dropped to $800,000 from $7 million five years ago.

A U.S. listing "will keep the window open for further opportunities in accessing the capital markets," said Carlos Moctezuma, head of investor relations at Iusacell.

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