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Alpha Bank (OTCPK:ALBKY) is a Greek bank listed on the Athens Stock Exchange and also has an ADR listed on the Pink Sheets market in the US. Four ADRs are equivalent to one common share.

After the company's rights offering the depositary of the ADR sold the rights and distributed the proceeds of $0.506057 to the ADR holders with a payable date of June 10, 2013.

  • On June 10 the ADR opened at $0.73 and closed at $0.73
  • On June 11 the ADR opened at $0.29 and closed at $0.42
  • On June 12 the ADR opened at $0.44 and closed at $0.55
  • On June 13 the ADR opened at $0.58 and closed at $0.64

The closing price of the ADR on June 13 gives an equivalent price for the common share as calculated below:

$0.64 x 4 = $2.56

$2.56 / 1.33 (€/$) = €1.92

This is where things get really strange. The closing price of Alpha Bank's common stock on the Athens Stock Exchange on June 13 is €0.473. Logically the ADR should be trading at $0.145. The ADR is trading at a 305% premium over the common stock for no apparent reason.

I talked on the phone with a representative of Deutsche Bank, which is the depositary bank for the ADR, to see if there where any developments that I wasn't aware of. The representative confirmed that nothing has changed with the ratio of the ADRs to the common stock and the dividend has already been paid. He also told me that the ADR may be trading at a premium because the books are closed until the rights offering is over.

Unless there is some information that I can't think of then the ADR should fall by about 75% if the price of the common stock doesn't change a lot.

An investor could short the ADR and buy the common stock on a 4/1 ratio expecting for the difference to close soon and make a very healthy profit with no risk.

Source: Alpha Bank: Arbitrage Trade Between The ADR And The Ordinary Shares

Additional disclosure: I am long Alpha Bank common stock.