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Financial News

Apr 2009 Financial News

Junior market begins with no stocks to trade

Apr 01, 2009

The Jamaica Stock Exchange will go ahead with launching its junior market tomorrow, but without any of the 10 firms which the exchange had hoped would be on the board on opening day.

But the JSE's general manager, Marlene Street-Forrest, said by moving forward, even without listings, it would signal to small- and medium-sized companies that a vehicle existed through which they could gain equity financing.

"No company will be listed at launch date but, based on the feedback of the member-dealers, they are currently working with some companies to take them to market," Street-Forrest told Wednesday Business.

The junior exchange is meant for companies with a capital base of between $50 million and $500 million, which may be in need of equity injection.

Such companies won't be required to issue prospectuses. Instead, their initial public offerings can take the form of an advisory on the JSE website that the shares are on offer to the public.

The Government, which sees the junior exchange in terms of efforts to broaden the capital market, has offered incentives to firms that list on the junior bourse.

Tax holiday

They will be exempt from income for the first five years of listing and a 50 per cent tax holiday for another five years.

Listed firms, like those on the JSE's big board, will be required to file quarterly and annual reports, but listing requirements will be less rigorous than for those on the main market.

The small companies will be expected to work with a 'mentor', perhaps a corporate broker, to help guide them through the process.

Indeed, brokerage houses have in recent months been busy, attempting to nudge prospective listers towards the junior exchange, but so far none is quite ready or willing to go on the junior board.

"We have been approached by over 20 companies, each at various stages in the process of readiness," said Street-Forrest.

Anbell has told this newspaper it was one of the interested firms.

"However, one of the main challenge is that of the financial statements," said Street-Forrest of the potential listers.

"There are around 10 companies that we consider are near in respect to their readiness."

NCB Capital Markets is among the brokers hoping to bring listings to the junior exchange. But its vice president for business development, Dylan Coke, said while there is clear interest, firms are skittish for reasons ranging from reporting requirements to corporate governance demands.

"What we are seeing is a mixed bag," Coke said. "Some companies are profitable and successful but don't have the corporate governance features in place. Those who don't have a fully functional board may need to put this in place."

He added: "Others may need to bring their accounts up-to-date and may also need to provide a detailed business plan to assist in filling out the prospectus."

Slow start

While not willing to put a time frame within which NCB Capital Market will bring its first listing to the junior exchange, Coke was confident that there will eventually be firms on the board.

"We are working with a handful of companies, don't want to put a fixed date on when they will be ready to list," said Coke. "Some are more prepared than others."

"We are looking at each and the things they need to put in place so they can come to list and operate at the standard required of a listed company," he added.

Street-Forrest, too, was confident that firms will eventually list.

"As with everything, it takes time to build," she said. "We are not discouraged by the slow start and we are prepared to continue to give it the necessary support and time to develop."


Source:
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Wednesday April 1, 2009

http://www.jamaica-gleaner.com/gleaner/20090401/business/business2.html