EQUITY FINANCING LISTING ON THE JSE

Transcription

1 Equity Financing 1 EQUITY FINANCING LISTING ON THE JSE

2 What is Equity Financing 2 Equity Financing can be described as The process of raising capital through the sale of shares in an enterprise. It involves the acceptance of capital investment while giving up part ownership of a business.

3 Raising Equity Equity Financing spans a range of options: 3 from selling common equity to the sale of convertible preferred stock and can be done by way of an Initial Public Offering (IPO) to Private Placement. Raising equity by way of Private Placement, the offer is not made to the public but to select private investors.

4 Raising Equity Companies wishing to raise capital by way of an IPO have the option of listing on the Jamaica Stock Exchange s (JSE) main or junior market depending on its capital value. 4

5 5 JAMAICA STOCK EXCHANGE: MAIN MARKET

6 Main Market Requirements 6 A company with its shareholders equity above J$500 million after its capital raising activity would be eligible for listing on the JSE s main exchange, providing other criteria is met.

7 Main Market Requirements According to the JSE Rules: 7 EITHER there is a minimum of 100 share/stockholders holding in their own right not less than 20% of the issued ordinary capital (such percentage being not less than $125,000 nominal value) excluding the holding(s) of one or more controlling share/stockholder(s)

8 Main Market Requirements According to the JSE Rules: 8 OR There are arrangements then in place which the Exchange approves in writing as likely to result in such minimum holding (as to number of holders and their total holdings) being achieved by the end of business on the first day the securities are listed.

9 Main Market Requirements A company may list on the JSE via any of the following methods: 9 PROSPECTUS ISSUE: an offer to the public by or on behalf of a company at a fixed price. OFFER FOR SALE: an offer to the public, by or on behalf of a third party at a fixed price. OFFER BY TENDER: an offer to the public, by or on behalf of a company or a third.

10 Main Market Requirements 10 PLACING: an offer through stockbrokermembers of the 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.

11 Listing Costs Main Market 11

12 12 JAMAICA STOCK EXCHANGE: JUNIOR MARKET

13 Junior Market Requirements 13 The shareholder s equity of the company following the capital raising activity outlined in the prospectus shall not be less than J$50 million and shall not exceed $500 million.

14 Junior Market Requirements The company must have a minimum of 25 shareholders holding not less than 20% of the issued share capital. 14

15 Junior Market Requirements According to the regulatory policies of the JSE: 15 The only method of issue for the purposes of initial listing of the Junior Market company is that of a public offer requiring a prospectus issued in accordance with the Companies Act and the Securities Act. A public offer may be made by or on behalf of a company at a fixed offer price.

16 Benefits? There are a number of incentives to listing on the JSE s market, these include: 16 Reduced Trading fees, that is: JSE Cess, and JCSD trading fees - 50% less than Main Board. *This is applicable to companies listing between January 01, 2014 March 31, 2016, after which the tax holiday will no longer be applicable.

17 Tax Benefit Explored 17 The tax holiday has been considered the most attractive feature of listing on a Junior Market. It gives companies the opportunity. Example: If a company which in 2010 was required to pay $26 million in corporate taxes. Assuming a conservative growth rate in Profits of 10% over five years, the company would have paid approximately $172 million in corporate taxes. However, if the company was listed on the Junior Market, this $172 million could be reinvested into the business resulting in a faster expansion in operations.

18 Listing Costs Junior Market 18

19 Listing Costs - Junior Market According to the JSE s Junior Market guidelines, the following fees would also be applicable for new companies listing: Prospectus upload $25,000 Review of Prospectus $30,000 ISIN Number US$150 Strip $3,378.5 inclusive of GCT NB. All fees can be taken from the proceeds 19

20 20 Performance of Companies That Have Been Listed

21 Blue Power Group Limited BPOW Price Movement Since listing on the Junior Market at a price of $3.89 in April 2010, BPOW s share price have increased significantly. A capital appreciation of approximately 52% after having closed on February 04, 2014 at $9.80.

22 Financial Performance 22 Yr End. Overall CAGR Apr-10 Apr-11 Apr-12 Apr-13 Growth Rate TURNOVER 696,455, ,406, ,003,193 1,044,905, % 14.48% Gross Profit 126,888, ,556, ,417, ,268, % 22.33% Operating Profit 47,497,263 60,183,747 46,470,367 95,763, % 26.33% Interest Income 1,181,104 1,762,626 2,378,374 9,754, % % Pre-tax Profit 43,585,845 55,667,566 47,105, ,979, % 33.62% Net Profit 29,198,832 54,607,361 47,105, ,979, % 52.71% Blue Power has experienced significant growth in revenue and bottom line profits. The company s turnover have increased by an annual average compounded rate of 14.5% for the past 4 years. Net income closed the 2012/2013 financial year at $ million, the highest reported income since 2005.

23 Lasco Distributors Limited LASD Price Movement Lasco Distributors listed at $2.50 in October The company executed a 10:1 stock split in 2013 after having closed as high as $16.60, an increase of over 564%. At its current price of $1.44, BPOW has appreciated by 476% since listing.

24 Financial Performance 24 Yr End. Overall CAGR Mar.2010 Mar.2011 Mar.2012 Mar.2013 Growth CAGR $'000 $'000 $'000 $'000 Revenue 5,842,917 6,756,555 7,460,509 8,255, % 12% Gross Profit 1,112,501 1,352,221 1,577,395 1,641, % 14% Other Operating Income 6,611 49,694 19,798 34, % 73% Profit from Operations 257, , , , % 26% Profit Before Taxation 142, , , , % 53% Net Profit 97, , , , % 73% Lasco Distributor s revenue, as indicated above, have grown at an annual compounded rate of 12%, closing the 2012/2013 FY at $8.25 billion. Net income attributable to shareholders has increased by an annual average compounded rate of 73% for the past 4 years, closing at $ million last year.

25 25 How Can we Assist?

26 Getting Advise 26 Meet with Financial Advisor Financial Advisor assesses financial performance & business plans Financial Advisor determines eligibility If eligible, Financial Advisor structures share offer and sales strategy, prepares prospectus

27 Things to remember 27 Is the company an eligible company? Shareholders Equity must be greater than $50 mil but not more that $500 mil A mentor must be appointed Company must never have been listed on a main exchange Company should show history of sound financial performance Prepared by Mrs. Tania Waldron-Gooden of Mayberry Investments