Group members: Eltaj, Sadraddin, Dilsad, Renata, Vugar, Jaheed, Senan CASE STUDY #2
High Street Global Advisors, a global investment management organization is trying to understand the opportunities presented by the Royal Dutch/Shell pricing discrepancy. This case analyzes the benefits of shares of two twin companies Royal Dutch and Shell. Royal Dutch trades are more actively in the Netherlands and U.S. markets, whereas Shell trades are more actively in the United States. They are getting price benefit mainly from arbitrage opportunities arising from daily stock price difference between the prices of twin equities that cross-listed in different European stock markets. For example, a U.S. (Dutch) investor can buy Royal Dutch and Shell in New York (Amsterdam). Question 1:
Two parent companies- Royal Dutch Petroleum and Shell Transport and Trading position in the highest hierarchy in their organizational structure. The Royal Dutch and Shell Group of companies have just started from the 1907 deal. Their shares are held by the Group Holding Companies, which trade at a defined split- 60% and 40%. Additionally their share price is proportionally fixed. Its distinguished feature from most of the other companies is the joint operation of two companies which they represent two different countries. Cooperation between entities is one of the distinguished features of Royal Dutch and Shell. To sum up, we can conclude Royal Dutch and Shell equity firm as different entities, but their stocks are traded together, even at a split of 60% and 40%. Question 2:
American Depositary Receipts (ADRs)
ADRs was Introduced to the financial markets in 1927 and it Is a foreign equity security that has been Americanized or wrapped in such a way, that allows American investors to purchase foreign equities in the United States, investors purchase in dollars and their all dividends are received in dollars and corporate actions are in English which really Americanize foreign...
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