The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) is aiming "to revive in a very serious way" plans to create a market where small and medium-sized companies can list and raise capital, its top executive has revealed.

Keith Davies, the exchange's chief executive, told Tribune Business he is targeting early 2024 for the launch of what was called the Small Alternative Market so that "viable" companies can access investor capital "in a safe, secure and direct" manner once they meet BISX's listing requirements and protocols.

Disclosing that BISX has yet to determine a maximum and minimum threshold for how much these companies will be able to raise, he added that the launch date depends on when the exchange believes it has a "quality product" to offer the Bahamian capital markets and "get it right".

Mr Davies also told this newspaper that BISX would "absolutely" consider adding a crowd-funding tier to the exchange, although he affirmed it would be something separate and different from the Small Alternative Market. He added that if BISX enters this market it would introduce "crowd-funding plus", with the disclosure, transparency and reporting requirements likely to be more tougher than the rules that presently exist.

He added that both initiatives are part of a drive to increase the variety and availability of investment structures that Bahamian investors can currently access via BISX beyond listed equities, preference shares, mutual funds, and government and private sector debt, although he declined to go into specifics.

"We had years ago that secondary market which we called the Small Alternative Market," Mr Davies told Tribune Business. "That is something we are looking to revive in a very serious way. We have plans to augment that to provide safe, secure and direct access for small and medium-sized enterprises.

"It is not necessarily crowd-funding, but is definitely access for companies that are seeking capital but doing it in a way that I call 'the BISX way', collaborating with investment market participants to bring these viable companies forward in a responsible manner to the public."

Asked about maximum and minimum capital-raising thresholds for the Small Alternative Market, the BISX chief said: "I don't have a number on that just yet. The reality is that there is a cost that anyone looking to raise capital must bear. What we must balance is the cost to the company, and balance that with the cost of advice they must receive to be responsible in coming to the public.

"We want to do it in a way that does not over-burden the issuer, but being realistic. You can't simply back into something and expect to be successful. I think we have got to be real with people. Part of investing is the knowledge, but also managing expectations. One thing you are not going to do in the BISX market is make ridiculous claims and then raise money through our platform. That's not going to happen. We've been too serious for 24 years to allow that to happen."

Asked when BISX is aiming to launch the Small Alternative Market, something it first sought to develop many years ago, Mr Davies replied: "We are working on that as we speak. I would very much like to do that early next year if we are at a point where it's viable and we are able to deliver a quality product.

"The problem we've had in the past is that we get distracted because a number of other things arise, and we have to focus our energies in other directions. It's difficult to pre-suppose what will happen with the future of the market. Our target realistically will be next year, giving us some time and space to get it right."

ArawakX's regulatory woes potentially create a void that other entities and platforms may be able to fill in the crowd-funding space. Asked if BISX may target this sector, Mr Davies told Tribune Business: "If crowd-funding is an element of it, doing that in a responsible manner. I've always said that if we got into crowd-funding, it would be crowd-funding plus.

"The crowd-funding rules and reporting therein are something that really have to be scrutinised to make sure they're the standard. The rules set the baseline; there's nothing to say that you cannot go above it. Our reputation is that when you are on BISX, the information that comes out is on time, it's in full and it's transparent so everybody has expectations of the quality of information that flows from companies listed on BISX.

"If we go into a crowd-funding environment, we have to assure ourselves that the companies that come to us are capable of meeting those requirements that are synonymous with the BISX market. Would I consider it? Absolutely. Would we implement crowd-funding exactly as it exists? Probably not. We would add a few key elements to it and of course from an electronic standpoint we would do it in a way that will give people direct access to the type of information we would want to put out there."

Besides the initial capital raise and listing by an issuing company, Mr Davies said "the work begins" when it comes to reporting and disclosure to investors and the market. Timely information has to be available to shareholders on the company's performance, especially when material events take place that can affect its value and share price. Transparency around trading activity, namely who is trading, and at what value and how many shares, is also vital.

"There's an entire ecosystem that has to be put in place with crowd-funding. It's not one single thing, For us, if we're going to do it we're going to do it right," Mr Davies said. He confirmed that BISX is seeking to develop "more investment structures" to offer Bahamians and Bahamas-based investors, although he did not disclose details.

"We've covered all the traditional bases. We're looking to introduce different investment vehicles. We have a number of them we're working on right now. I don't talk until it is done, but suffice it to say we are looking at investment structures that speak to the diversification issue, which is a problem in the Bahamian market," Mr Davies said.

"We have a lot of people who would consider investing, but there are not a lot of investments readily available in front of them. BISX wants to achieve the capital formation goal, which is the hallmark of any exchange.... That includes avenues for companies to go public."