FT Alphaville " Drachma-tic equity Coca-Cola Hellenic Bottling SA - a pretty unexciting play on the Eastern European soft drinks market. Volume growth a bit flat. Only eight per cent of profit is Hellenic. Although, riskily for holders of its stock... the domicile is 100 per cent Hellenic. Societe Generale's analysts cut their target price for Coca-Cola Hellenic Bottling shares from €12 to €7.5 on Tuesday, reflecting the risk of that share price being suddenly converted to drachma in the near future. In other words, how will Greek capital controls work at the company level - even a company which is not hugely economically exposed to a Greek euro exit. In addition to getting relatively little revenue from its Greece ops, Coca-Cola Hellenic issues debt from a Netherlands subsidiary. That means it's not at risk of forced redenomination by the Greek government. But the equity part of the capital structure would be. So, from SocGen, a lesson in checking where your shares live: If Greece puts a ban on capital outflow as it moves back to drachma we think it might be very difficult for shareholders to repatriate their money if they wish to. We believe this is the most significant risk to current shareholders of CCH. If shares in CCH were in a physical form it would be possible in our view to pre-empt the ban by physically moving shares out of the country. With the physical share in your hands in London you would still be able to sell it, get the cash and give proof of ownership (the piece of paper) to the buyer, even with a capital outflow ban in Greece. However, shares in CCH are dematerialised. So where are the shares? Our understanding is that they are almost all in Greece (we estimate around 3% of the capital is in ADRs in the US).. We believe owning the ADR might not be helpful either. Theoretically you could get your money back in $. However, to do so you would have to sell your share to the US market maker. We think the market maker is unlikely to offer you a good price for the share as: 1) demand for the ADR from other investors might be extremely limited; and 2) it would expose itself to the risk of not being able to convert the ADR back into the Greek shares (depending on what the Greek regulator decides) or of being unable to move its cash outside Greece if it can convert the ADR into shares. So you would take a big hit on the value of your ADR if you were to sell it, but with the advantage that whatever money you get back is in your pocket and not stuck in Greece. The idea is that most real money would be forced to sell the stock as soon as a euro exit plan was put into effect (which in the way these things tend to work, would be overnight) because they'd be banned from holding drachma assets, causing a sharp sell-off. Note this is after the Athens index has already shrunk to 1990 levels. The two ways out of this for Coca-Cola Hellenic, argue SocGen, are either to shift listing from Athens to another domicile... or to merge with (US-listed) Coca-Cola Enterprises, Coca-Cola's Western European bottler. Related link: Multinationals act to mitigate euro risk - FT This entry was posted by Joseph Cotterill on Wednesday, May 23rd, 2012 at 8:15 and is filed under Capital markets. Tagged with coca cola, currencies, drachma, euro, Greece, redenomination.