Freedom Broker explains why Halyk Bank’s GDR value dropped on the LSE

On Dec. 12, the value of global depository receipts (GDRs) of Halyk Bank traded on the London Stock Exchange (LSE) dropped by 5.3%. Analysts from Freedom Broker believe this decline was caused by a dividend gap on Dec. 13.

Halyk Bank is set to pay $0.75 per GDR, which can be converted into 40 common shares. As of Oct. 1, The Bank of New York, a nominal holder for the securities, held 3.1 billion shares, equivalent to 77.4 million GDRs. In other words, holders of Halyk Bank’s GDRs expected to receive $58 million in total dividends. Meanwhile, in September, the bank announced a buyback program for its GDRs. The initiative, valued at $1.1 million, will last for one year.

According to Freedom Broker, the dividend amount per GDR isn’t significant enough to cause such a sharp drop in value. Instead, they attribute the decline to the dividend gap — the rapid decrease in a share’s price on the trading day immediately following the ex-dividend date. Typically, this reduction reflects the dividend amount per share and results from the company’s decision to pay dividends to its shareholders.

At the time of publication, Halyk Bank’s GDRs on the LSE were trading at $17.84, marking a 0.45% decline compared to the closing price on Dec. 12. The bank’s common shares on the Kazakhstan Stock Exchange (KASE) were trading at 242.95 tenge ($0.46), reflecting a 1.68% decline.