Ample Rich and ADRs

Tom’s new post “Shin Corp debunked” is a good counter point to some of the wilder speculations regarding the Shin Corp deal. (Tom reformats a series of posts made by ‘Thai for Thai’ for better readability.) Too bad though that it doesn’t address most of the questions raised by other recent articles, which cast the net wider on ptential wrongdoing.

Section 2 (Offshore Company) got my attention because again it trots out the same assertion, made earlier by the Thaksin family spokesman, that Ample Rich Investments was set up as a British Virgin Islands company to facillitate the offering of Shin shares as American Despository Receipts (ADRs) on the NASDAQ stock exchange.

T4T very correctly notes that there’s nothing wrong with incorporating offshore companies – they exist all over the world (Thailand’s BIBF is one such regime), provide significant operational efficiencies in you are operating globally or regionally (as with ShinSat), and major exchanges like the NASDAQ allow shares in companies from offshore jurisictions to be traded.

But then again, how does Ample Rich aid Shin Corp’s previously stated goal of trading its ADRs on the NASDAQ?

Right now Shin Corp ADRs already trade on the over-the-counter (OTC) market in the US (ADR Level I) – Shin Corp states here that Ample Rich is setup to “raise fund through the Stock Exchange of the United state of America” essentially upgrading its ADR program to level III.

From Shin Corp’s view as a listed company, to be able to raise funds through the ADR program it must meet the NASDAQ’s stricter listing requirements (disclosure rules, Sarbanes-Oxley, GAAP accounting rules, etc.) and put together a prospectus and other SEC filings. My non-professional opinion is that the set-up of Ample Rich doesn’t contribute at all towards meeting these goals; it is after all just some shuffling by a major shareholder on how he wants to hold his Shin shares. There’s pretty big gap in cause and effect here that no one is trying to explain.

Finance experts out there, please help. I have an idea that if the Shinawatras were to divest the own shares as part of the ADR offering, Ample Rich would make it easier to deal (i.e. reduce) with US capital gains tax liability.

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