Campbell
THINKING OF taking your company public? It could be the best decision you ever made. Take the experience of Capital & Credit Merchant Bank. In April 2003, the bank's chairman Ryland Campbell and his management team floated an Initial Public Offering (IPO) of 180 million shares at $5 each as a result of which, the company ended up raising $628 million. Of particular significance is that the Capital & Credit IPO succeeded in spite of the fact that the market environment was not the most hospitable at the time.
"We persevered," said Mr. Campbell recently, "because we had made a strong commitment to the process. We knew that the market was the best source for raising the additional capital we needed to fund the continued growth, development and planned expansion of our merchant bank."
Mr. Campbell will elaborate upon the Capital & Credit experience when he addresses the Jamaica Stock Exchange's 35th Anniversary Symposium 'Gearing Jamaican Companies for the 21st Century' on June 22 at the Pegasus Hotel. Mr. Campbell will speak on the topic, "How to list successfully on the Jamaica Stock Exchange."
SIGNIFICANT DECISIONS
Edward Kwalwasser, group executive vice-president, New York Stock Exchange, will deliver the keynote address on the theme of the symposium, 'Gearing Jamaican Companies for the 21st Century: New strategies and standards', On May 26, 2003, Capital & Credit became the first merchant bank to list on the Jamaica Stock Exchange and another first was immediately revealed. Shareholders' equity had reached $1.2 billion and this was the first time in Jamaica that a merchant bank had attained that level. Transforming a company from being privately held to one that is owned by members of the public and listed on a stock exchange is one of the most significant decisions a company's owners could make about that company's life and future.
"Once a company becomes listed, it must adhere to a culture of good corporate governance, transparency and timely disclosure," Mr. Campbell emphasised. "But, these are all practices that should be promoted and maintained whether the company is listed or not. They make for better business."
DETERMINING COMPANY VALUE
Being listed also helps to resolve the issue of company valuation. What is your company worth? When you are publicly traded, the market supplies a ready answer. The market price of your stock becomes an important benchmark in determining the value of your company. Here, disclosure and transparency are key. The more information you provide to investors and analysts, as well as the timeliness of it, the greater the likelihood that the market will value your company fairly and accurately. In most cases, a public listing increases the value of a company as determined by the rising market price for the shares. In Capital & Credit's case, the increase has been substantial. Trading commenced on May 26, 2003 at $5 and at June 11, 2004 the price had appreciated to $18.80, an increase of 276 per cent.
In addition, Mr. Campbell said that Capital & Credit has gained tangible value from the heightened visibility resulting from the public offer as well as from the listing process.
METHODS OF LISTING
While going public by means of an IPO accompanied by a prospectus issue is the typical way in which a company has become listed on the Jamaica Stock Exchange, it is not the only method. The Jamaica Stock Exchange publication, 'Going Public', outlines four other methods by which a company may list its securities:
Offer for sale to the public by or on behalf of a third party at a fixed price.
Offer by tender to the public by or on behalf of a company or a third party by tender.
Placing an offer through a stockbroker-member of the Jamaica Stock Exchange to sell the securities of a company to the public.
Introduction where none of the company's securities are being offered to the public.
Whichever method is chosen, there is a menu of steps that need to be followed and a number of professional advisors who may need to be consulted and a series of costs that will have to be met in order to ensure the efficiency and the effectiveness of the listing. However, a company requesting to be listed by any method must meet certain minimum criteria. The company must:
Be incorporated, registered or doing business in a CARICOM country or be listed on a recognised stock exchange.
Have total share and loan capital of at least $200,000, with the share capital being not less than $100,000.
Have issued ordinary stock with nominal value of not less than $100,000.
Have at least 100 shareholders holding in their own right, not less than 20 per cent of the issued ordinary capital, this percentage being not less than $50,000, excluding the holders of one or more controlling shareholders.
Other presenters and topics included in the JSE symposium are:
'Establishing Corporate Governance in Emerging Markets' Christopher Bovell, attorney-at-law and chairman, Dyoll Group Ltd.
'New Accounting Standards' Linroy J. Marshall, president, Institutes of Chartered Accountants.
'Regulatory Compliance & Changes: A Local Perspec-tive' Brian Wynter, executive director, Financial Services Commission.
JSE General Manager Marlene Street advises that a business development unit will be instituted shortly at the Jamaica Stock Exchange that will assist interested parties to select the method of listing best suited to their company's needs and objectives as well as guide them through the entire listing process.
This column is part of the on-going public education programme of the Council of the Jamaica Stock Exchange
