Renewable energy start-up IPO fizzles
Start-up renewable energy company Caribbean Energy Finance Company Limited (CEFCL) failed to raise even half the $452 million it hoped to sweep in its initial public offering.
The IPO, which priced CEFCL at $1.26 billion on the bet that the company would grow its profit to US$650,000 ($75 million) within five years of operations, fell short of the minimum $231 million mark.
"All amounts collected from applicants will be returned," said a notification to the Jamaica Stock Exchange (JSE).
The start-up extended its share offering, which opened on April 13, by a week, but that was not enough additional time for marketers to garner the level of interest from the public for the IPO's success before it closed on Friday. The offer was priced at $7.30 per share.
"There are two things people had an issue with," said Leo Williams, director and a large shareholder in CEFCL. "First, it was a start-up. We intend to solve that issue by actually starting before raising the funds."
The second issue was the sizeable sum that was being sought given the structure of the offer.
"If the management shares were a separate class of share from the investment shares, then the IPO would have gone through more easily," Williams told Wednesday Business.
Williams and Damian Lyn, owner of Alternative Power Sources (APS), currently own 93.3 per cent of Caribbean Energy. Their collective shareholding would have fallen to 59.2 per cent after the IPO had it been successful.
"The next step is to proceed to implement the plan as we had articulated but just raising the money privately," Williams said.
He said that the company has managed to garner sufficient financial interest to start-up operations, but the owners plan to begin trading on a smaller scale than was planned before they go back to the market to raise more funds.
The original plan for CEFCL was to focus initially on providing solar photovoltaic energy equipment. Then, they would grow the portfolio to become more diversified in the supply of alternative energy generation technologies, according to the CEFCL directors.
For example, the company projected that co-generation solutions would eventually make up over 45 per cent of its portfolio.
Also, maintenance contracts for equipment were expected to become the highest earner for the company. Those contracts would see CEFCL outsourcing services to sub-contractors that have track records for delivering maintenance - primarily APS.
This is the second failed IPO for a start-up intended to list on the junior market of the JSE since the exchange opened up to small business listings in 2009. Investment firm Exponential Holdings Limited missed its $300 million minimum threshold in its 2013 bid to raise $500 million.
The only other start-up to make a public offer of shares on the junior market was song publisher C2W Music. It successfully raised $129 million in 2012 but has struggled financially since its listing.