The Jamaica Stock Exchange. - FileLONG-TERM, SUSTAINABLE economic growth in the region requires the development of liquid capital markets that are efficient and transparent. Capital markets channel savings towards the more profitable investments available in the economy and facilitate corporate expansion beyond self-financing or venture investments. When a company goes public, it takes advantage of this function of capital markets. On February 20, the Jamaica Stock Exchange will offer a half-day seminar entitled, "Going Public: What's in it for your company?" Geared specifically for owners of or shareholders in companies that would like to learn more about the process of going public, the seminar will examine a range of issues from the exploratory stage to the elements of launching a successful public offer.
Keynote speaker at the seminar, Keith M. King, director of Corporate & Investment Banking, RBTT Financial Group, Trinidad & Tobago, will discuss the vital role banks play in strengthening the efficiency of capital markets.
Other presenters at the seminar on going public, which will be chaired by JSE Chairman, Roy Johnson, are:
Wain Iton, general manager, JSE Methods of listing & the responsibilities of a public listed company.
Donna Duncan-Scott, managing director, JMMB The making of a successful public offer.
Lance Hylton, Partner, Myers Fletcher & Gordon the role of the attorney-at-law.
Paul Cole, director, KPMG the role of accountant.
Following is the final instalment of answers to the most frequently asked questions about going public and the listing process:
1. WHAT PROFESSIONAL
ASSISTANCE TEAM SHOULD A COMPANY PUT TOGETHER BEFORE GOING PUBLIC?
Both internal and external teams should be in place. The internal teams should include a functioning board with sound governance policies and procedures and a strong management team with accountabilities for general management, operations, financial management, marketing and human resource development. The external team should include securities advisors or an investment banker, accountants, attorneys-at law and financial public relations advisors.
2. WHEN IS THE RIGHT
TIME TO GO PUBLIC?
After a decision has been taken to go public, the right time from the company's standpoint, is when all the internal preparations have been made, the necessary documentation can be produced, the internal team is in place and the external advisors all say "go." From the market's standpoint, the right time is during a bull market. The market must be buoyant and there must be an acceptable level of confidence in the economy. This facilitates optimal pricing of the issue. Going public in Jamaica should also be timed to avoid simultaneous offerings.
3. WHAT IS AN UNDERWRITER AND WHAT IS THEIR ROLE?
An underwriter is a financial institution, usually an investment bank that assumes the risk and assures the successful distribution of the issue. The investment banker may also form an underwriting group, also called a syndicate, for the purpose of pooling the risk. The agreement between the underwriter and the issuer may be base on any one of the following arrangements:
i. Firm Commitment the underwriter makes an outright purchase of the company's shares from the issuer, resells them to the public and makes a profit on the difference between their purchase price, determined through competitive bidding or negotiation, and the public offering price.
ii. Best Effort (Agent) Here, the underwriter agrees to make their best effort to sell the issue to the public. Instead of buying the shares outright, the underwriter acts as agents with an option to buy and the authority to sell the securities, receiving a commission on the sales made.
iii. All or None This method gives the issuer the right to cancel the entire issue if the underwriting is not fully subscribed.
4. WHAT IS THE FINANCIAL SERVICES COMMISSION AND WHAT IS ITS ROLE IN THE LISTING PROCESS?
The Financial Services Commis-sion (FSC) was established by the Act of the same name in 2001 for the principal purpose of protecting customers of financial services. The FSC does not play any role in the listing process, which is fully under the jurisdiction of the Jamaica Stock Exchange. However, the FSC does supervise and regulate prescribed financial institutions, including the Jamaica Stock Exchange. When capital is raised by way of a prospectus, the prospectus must be registered with the FSC.
5. HOW CAN I BE SURE THAT THE MARKET WILL PRICE MY COMPANY FAIRLY ONCE I GO PUBLIC?
The fair price for a company's shares is the price that a willing buyer will pay and a willing seller will accept at any given time. That is what the market does. It brings together willing buyers and willing sellers who determine the fair market value of the listed companies' shares through daily trading.
6. WHAT ARE THE BENEFITS
TO AN INVESTOR WHEN A COMPANY GOES PUBLIC?
Going public creates a market for a company's shares. This provides liquidity to investors, making it possible for them to sell or buy more shares readily, in accordance with their investment objectives. Going public also provides venture capitalists or founders with an exit strategy, through which they can recover some or all of their initial investment plus the appreciated value of the shares. Representatives of companies desirous of going public are encouraged to contact the Jamaica Stock Exchange or a stockbroker/member of the Exchange.
This column is part of an
on-going public education
programme of the Jamaica Stock Exchange
