BISX finds partner to ‘revive’ Junior Market


Tribune Business Editor


The Bahamas International Securities Exchange (BISX) is aiming to unveil a partnership by end-March that will “revive” its long-planned junior market facility.

Keith Davies, the exchange’s chief executive, told Tribune Business that the partnership with another Bahamian entity would provide “an avenue” for BISX to realise its dream of assisting small and medium-sized businesses (SME) in raising capital.

Mr Davies declined to divulge who BISX’s potential partner is. However, Tribune Business understands that it is the Bahamas Chamber of Commerce and Employers Confederation (BCCEC).

“One of the things that I really want to try and put back in the mix is reviving the BISX SAM initiative, the Small Alternative Market (SAM),” Mr Davies told Tribune Business.

“We do have an avenue for that. We’re going to be partnering with an entity in the Bahamas whose job is to focus in that area....”

The Chamber will likely act as the ‘bridge’ between BISX and Bahamian companies who are seeking to raise $1 million or less in financing.

It is already heavily involved in the sector via its newly-launched SME Help Desk and work on the proposed Small and Medium-Sized Enterprises (SME) Development Bill.

And the Chamber’s membership lists, and central role in private sector advocacy, potentially provide a fertile base from which BISX can source SAM listings.

“We now have an identified partner that we’re going to work with to make this a reality,” Mr Davies added of BISX’s proposed SAM facility.

“One of the reasons we have not been able to bring it to reality is that we lacked a partner. Now we’re working together, and by the end of the first quarter we will be able to speak publicly to that.”

The BISX chief executive said entrepreneurs and SMEs always required capital to bring their ideas to fruition, and invest in job-creating expansions when the time was right.

He implied that BISX’s proposed SAM facility would enable them to better access financing options, such as equity capital and securitised debt (corporate bonds and preference shares).

SMEs would become less reliant on traditional financing sources, such as the banks, friends and family, and so-called ‘angel’ investors - a valuable development in an environment where access to bank credit has become much more difficult.

Micro listing facilities, targeting companies with smaller capitalisations than so-called ‘Main Board’ listings, have become increasingly popular and a major growth industry among global stock exchanges.

London has its Alternative Investment Market (AIM) and, closer to home, the Bahamas can draw on the precedent set by the Jamaica Stock Exchange (JSE). Its Junior Market for smaller cap stocks, which was initiated in 2010, was the JSE’s only growth area amid the recession.

BISX’s own version, the SAM, has been on the exchange’s drawing board since at least 2012. If the proposed junior market facility is successful, it would not just benefit the listed companies themselves and the wider economy, but BISX itself and the broader capital markets.

A micro listing facility would enable Bahamian companies, who choose to go this route, to build up a track record of financial performance with investors. It would also help them to become familiar with listing, disclosure and compliance requirements, thus preparing them to eventually graduate to a BISX ‘Main Board listing’.

Mr Davies, meanwhile, revealed that BISX also plans to host a “two-way” meeting with its 20 ‘Main Board’ listings around mid-year 2016.

He told Tribune Business that discussions would focus on how to improve the market’s structure, and how listed companies could “position themselves in the best light possible” with investors.

“We’re hosting a meeting of listed companies, listed issuers,” Mr Davies said. “We’re going to speak to them about the market’s structure, trading, disclosure and reporting, as well as other ways they can improve their place in the market.

“It’s about having a well-rounded market. We don’t determine the share prices, but we want to make sure the companies present themselves in the best light possible.”

Emphasising that the proposed meeting would not be ‘one-sided’, Mr Davies added: “It’s a two-way street. Under no circumstances do we believe we can dictate or put the thumb on. We grow the market through dialogue and innovation.”

Many BISX-listed companies have long complained that the relatively small pool of buyers and sellers makes for an illiquid Bahamian capital market, where stocks fail to reflect the underlying business’s true worth and do not trade on fundamentals.

This has prompted the likes of Cable Bahamas, Bahamas Waste and AML Foods to all launch share buyback programmes to support the value of their stocks, and ‘mop up’ small retail investors seeking to ‘cash out’ at prices well below value.

Mr Davies acknowledged to Tribune Business that the Bahamian capital markets’ size was “a weakness”, but said this was exacerbated by the relatively small number of shares placed into the public domain by several listed companies.

He pointed out that many BISX companies were controlled by either a single majority investor, or like-minded group of shareholders, who were unwilling to relinquish control by selling more stock to outside institutional and retail investors.

As an example, Mr Davies pointed to the Arawak Port Development Company (APD) initial public offering (IPO) in 2011.

The last IPO in the Bahamas, just 20 per cent of the company’s ordinary shares were made available to the public in a “bottom’s up” offering that was designed to make it accessible to local retail investors.

Although APD gained a broad investor base of around 12,000 shareholders, Mr Davies said the small trading volumes that naturally resulted worked against share price movements that reflect the company’s value.

He suggested that “the structure of that was something that left people wanting”.


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