Are you ready to get listed on the Jamaica Stock Exchange?
Posted in: Investment Basics
There are many businesses that are eligible to list on the Jamaica Stock Exchange, but they lack the right information to take the next steps. If you’re wondering why you’d want to take your company public we’d love to share three benefits before we dive into ‘How to prepare your company to get listed’.
A great example of a company that recently went public and is now reaping the benefits is Main Event Entertainment Limited. In January 2017, Main Event priced its IPO at $2 per share to raise $120 million via the Junior Stock Market.
This is by far the most common reason why companies decide to go public. The money raised is often used to expand the business, fund research and development and even pay-off debt.
Increased Brand Profile
Once a company is listed on the Jamaica Stock Exchange it earns a level of prestige. The added publicity from being listed allows the company to be seen by new customers and provides free advertising daily by virtue of news related to the movement of its share price. Additionally, public traded companies are more likely to benefit from a lower cost of capital from financial institutions. Potential suppliers will have increased confidence in their viability, which often leads to improved credit terms. In broadening the shareholder base to include employees of the company, those employees who buy-in as owners often display increased levels of productivity.
The value of a publicly traded company is fairly simple to determine and stocks can be more comfortably converted to liquid cash, if necessary. This is far more convenient, cost-efficient and timely than liquidating shares in a private company.
Now that we know some of the main benefits of listing your company, how do you know if you are ready to go public? Here are four questions you should ask before you consider listing your company on the Jamaica Stock Exchange.
1. Do you have the right management team in place?
The most successful companies are driven by strong teams. If this is not already in place you’ll want to bring on a senior management team that has an excellent knowledge of finance and accounting when it comes to complying with the intricate financial and accounting requirements to be listed on the Jamaica Stock Exchange. You may opt to appoint a Chief Financial Officer (CFO) who has past experience in a public company.
2. Does your company have a good track record?
Investment bankers seek to take to market companies that will be successful in raising the desired amount of capital and thus provide investors with a substantial return on their investment. It is for this reason that it is important that your company experiences above average growth in its industry for consecutive years. Inconsistent or marginal growth is less favourable, as it may predate inconsistent post-listing performance. An attractive track record includes, consistent financial performance, an experienced and tenured management team, favourable growth prospects, and execution of a focused strategic plan.
3. Do the pros of going public outweigh the cons?
Financially and otherwise, raising equity capital in the public markets is a costly exercise even without consideration of legal, accounting and other advisors’ fees and expenses. Another factor to consider is that public disclosure will be required by your company on a quarterly basis by virtue of quarterly posting of financial performance with the Jamaica Stock Exchange. Your company will experience increased pressure to perform as scrutiny would be extended to additional shareholders. Once you have determined that the pros far outweigh the cons you can begin to consider this as an option for your company.
4. Is the market right?
Is it a possibility that your company is ready to be listed but the timing isn’t right? Though it is impossible to forecast the market’s mood, you should be flexible if you need to adjust your schedule. The wrong timing can be the difference between entering a bull market with robust trading activity and capital appreciation, versus a bear market with generally muted activity. The excerpt below gives more context on how the IPO window works:
“At any time, an IPO window may be open for companies within certain favored industries and sometimes the window may be open for companies in all industries. Missing an IPO window by as little as a few weeks can result in a postponed or withdrawn IPO or a lower market valuation.” – pwc
What can you expect after you go public?
A great example of a company that recently went public and is now reaping the benefits is Main Event Entertainment Limited. In January 2017, Main Event priced its IPO at $2 per share to raise $120 million via the Junior Stock market. This would allow them to purchase new equipment and pursue new clientele while expanding to the Western end of Jamaica. What made it a solid listing candidate was its length of tenure in the entertainment industry, a solid reputation, revenues in excess of JMD $1 Billion and being the first event management company to list
The result? Main Event’s IPO closed after 58 seconds on its opening day as it raised raised approximately J$673 million and was oversubscribed multiple times. In addition to a tripling of its share price since listing, the company has become more visible by virtue of newspaper columns and public publishing of their financial statements.
Hopefully, these four qualifying questions have helped you to determine whether or not your company is ready to take the next step.
by IDEAL GROUP
For almost 30 years, we have built a strong reputation in over delivering to our clients by providing flexible solutions that are tailored to their specific needs.