The quest to bring Latin American firms to the OTCQX

Friday, August 19, 2011

Several of Latin America's largest banks have been trading on the NYSE for many years, and some are also listed on the Latibex exchange in Madrid.

In the future, we could see a growing number of banks, non-bank financial companies and corporations from other sectors in Latin America list their shares on the OTCQX exchange.

US investment bank Madison Williams has opened an office in Brazil in a bid to attract Brazilian and other Latin American companies to the OTCQX.

BNamericas spoke with Madison Williams' Latin American representative director, Anand Hemnani, about the creation and growth of the OTCQX, and the prospects of Latin American companies choosing this exchange for their overseas listings in the future.

BNamericas: Why was there a need for another exchange in the US for foreign firms, and how has the OTCQX evolved since its creation?

Hemnani: The OTCQX was created in 2007 to offer simpler and cheaper stock listings for foreign companies looking to access US investors. New regulations - such as Sarbanes-Oxley - had made it increasingly expensive and burdensome for foreign companies to trade on the NYSE and Nasdaq. The OTCQX platform provides non-dilutive access to the US market allowing for greater global liquidity and enhances access to capital.

The growth in the number of companies and trading volume has been very impressive since the creation of this exchange. Today there are 240 companies listed with a market capitalization of more than US$1.1tn. You can now see global multinationals like BNP Paribas, Roche and Adidas trading on the OTCQX.

BNamericas: How is the listing process different from that of NYSE and Nasdaq?

Hemnani: The listing relies on an issuer's home country disclosure and does not require SEC registration, Sarbanes-Oxley compliance or US GAAP reporting rules. This can bring down the listing to as little as 10% of what it can cost a foreign company to trade on the NYSE and Nasdaq.

BNamericas: Why are Latin American companies increasingly seeing OTCQX as an alternative to the NYSE, apart from the cost and red-tape factors?

Hemnani: Latin American issuers are rightfully beginning to look to the OTCQX as a tool to access a larger number of non-qualified institutional investors. They're also taking advantage of the fact that an OTCQX quotation enables brokers to recommend OTCQX securities to US investors, and Madison Williams' Principal American Liaison sponsorship allows qualified issuer clients the benefit of US equity analyst coverage.

BNamericas: In what Latin American country have you seen the strongest interest among companies in listing on OTCQX so far?

Hemnani: There are several Latin American issuers on the OTCQX today, most of them coming from Brazil, including the world's largest animal protein processing company, JBS. The latest company to list on the exchange was leading Brazilian card acquirer Cielo, which began trading in June this year.

BNamericas: Besides Brazil, what other countries in the region do you expect to produce new listings for the OTCQX?

Hemnani: The Chilean, Colombian and Peruvian exchanges are qualified exchanges and should begin cross-listing a number of companies, including financial services companies, over the coming months.

BNamericas: What do you mean by qualified exchanges?

Hemnani: All companies that are traded on Brazil's BM&FBovespa, as well as on the Chilean, Colombian and Peruvian exchanges can list on OTCQX because they're exchanges associated with the OTCQX.

About Anand Hemnani

Anand Hemnani has 14 years of experience as an adviser to and originator of M&A deals, project development and project finance across Latin America.

Prior to joining Madison Williams, he worked for Washington, DC-based advisory firm CG/LA Infrastructure, where he was senior VP. Hemnani also serves on the board of a global consumer products manufacturing and distribution company with assets in Asia, West Africa and Latin America.

Hemnani is a graduate of Babson College.

About the company

New York-based Madison Williams is a privately held capital markets and investment banking firm offering advisory services, equity sales, trading and research services to institutional and corporate clients. In the last five years, the firm has participated in more than 285 investment banking transactions valued in excess of US$38bn.