Goodbye, Telebras; Hello, 12 Spinoffs

Brazilian telecom giant Telebras on Monday ended its reign as the most widely held foreign stock on U.S. markets--opening the way for a battle among its 12 spinoff phone companies for investors.

In “when-issued” trading on the New York Stock Exchange, shares of Telesp Participacoes (ticker: TSP), which serves Sao Paulo, Brazil’s most populous state, was the most active of the “Baby ‘Bras.”

All 12 of the companies will begin trading as American depositary receipts on the NYSE in coming days.

The battle for U.S. stockholders in Telebras, which was divided and sold to investors for $19 billion in July, may be hard-fought. Because many U.S. fund managers have dumped Brazilian holdings in recent months because of concern about a possible currency devaluation, it may be hard to convince former Telebras holders to stay in the smaller spinoff companies.

Reflecting that insecurity, many investors have been switching their Telebras funds into basket securities created to mimic the behavior of Telebras even after its split. Telebras Holders (ticker: TBH), created for that purpose by Merrill Lynch & Co., rose $4.56 to close at $84.50 on the NYSE on Monday.

The old Telebras (TBR) rose $4.25 to close at $84.25 on Monday. It will continue trading until all of the 12 spinoffs are trading fully.