Sat | Jan 20, 2018

JSE wants IPO brokers to do more to favour general public

Published:Friday | February 10, 2017 | 12:00 AMSteven Jackson
Robin Levy, JSE Deputy General Manager

Investors are still scurrying to buy Main Event Entertainment Group shares, which are already set to double in price since listing on the stock market on Wednesday.

Some 2.2 per cent of the shares were offered initially to the 'general public', but even then that grouping ended up with roughly 1.2 per cent of the allotment in the face of a big oversubscription of the initial public offering.

In response, the Jamaica Stock Exchange (JSE) confirmed to the Financial Gleaner that it is considering ways of enticing brokers to widen the pool of shares to investors when IPOs come to the market.

"We are encouraging dealers to increase the float to make more shares available to the general public, because we want more public participation," said JSE Deputy General Manager Robin Levy when asked at the listing ceremony about concerns by some members of the public and brokerage community that they could not get much shares in the Main Event IPO.

The JSE requires that 20 per cent of the company lands in the hands of at least 25 shareholders outside of the owners of the company that is floating its shares. The Main Event IPO offered 20 per cent of the company at $2 per share to raise $120 million, but surpassed that in subscriptions.

The offer got 1,056 applications valued at approximately $673 million, which was apportioned to subscribers.

The JSE, years earlier, considered raising the minimum for a stock market float from 20 per cent of a company to 30 per cent. However, it's still unclear whether raising the limit alone would increase public ownership in the case of massive oversubscription.

Collaborative approach

"Nothing is off the table. But it would be a collaborative approach. We don't want to kill investments from coming to the market," said Levy. "Plus, investors have an opportunity to enter the secondary market once it's listed and the [early] shareholders have reached their investment goals," he said.

Mayberry Investments Limited, which brokered the listing of Main Event, argues, however, that 100 per cent of the shares were issued to the 'public'. The prospectus makes the distinction between general public and public.

"The issue was massively oversubscribed. There are other companies which had a similar structure. The difference was the level of demand," said Mayberry CEO Gary Peart in comments made via text messaging with the Financial Gleaner following the listing of Main Event.

The group of shares which were 100 per cent allotted to subscribers above 3,000 units were those reserved for Mayberry West Indies and key partners of Main Event. Mayberry clients received 4.6 per cent above the first 3,000 shares.

Main Event's share capital comprises 300 million units of which MEEG Holdings Limited holds 240 million units, or 80 per cent of the shareholding. Mayberry Client Reserved Share applicants received 15 million shares or five per cent, while Mayberry West Indies Reserved Share applicants got a similar allotment.

Main Event provides rental of entertainment equipment along with signage and associated services.

Prime Minister Andrew Holness, who participated in the listing ceremony, applauded the owners of the newly listed stock and the success of the Main Event junior market IPO.

"This is part of the crime-fighting plan," Holness said. "The more you grow, then the more jobs will be created and the less unattached young people whose hands are idle."

Main Event is the first to list since the Holness administration restored the 10 years of tax-break offer to junior market listings. The previous administration had began phasing out the tax breaks.

The 12-year-old Main Event, owned by Solomon Sharpe and Richard Bair, made more than $1 billion in revenue for its 2016 financial year.

"It is a testament to hard work. You don't have to be a lawyer, because we found out that we were entrepreneurs," said CEO Sharpe at the listing ceremony at the JSE's offices in downtown Kingston.

"Main Event, for me, was a second chance," Sharpe added.