National Commercial Bank Jamaica (NCBJ) has delayed listing its US$258 million worth of shares on the New York Stock Exchange based on pricing concerns by investors.
The bank, however, claimed high interest in the initial public offering (IPO) even as it announced that the scheduled February 6 pricing had been postponed.
The IPO did not make sense at this time for the brokerage community, said president and CEO of Stocks & Securities Limited, Mark Croskery, in agreement with NCBJ's decision.
"Why go at this time when Jamaica does not have an International Monetary Fund (IMF) agreement and stocks are low and undervalued and trading in NCB is at around J$22 rather than J$30. This does have an impact on pricing for overseas brokers and has impacted the price. So NCB's overseas [investment bankers] did the right thing," said Croskery.
The Jamaican economy currently suffers from crime, joblessness, recession, deteriorating international reserves, and dollar depreciation. It currently awaits an IMF agreement in order to boost its reserves, while also unlocking access to other multilateral funding.
Within this context, NCBJ wanted US$13-US$15 per share in an attempt to raise as much as an US$258 million, but expected to net US$158 million after IPO-related expenses.
Overseas investors, however, wanted a cheaper share price which better reflected the local reality.
NCBJ trades on the local exchange at the equivalent of under US$0.22 a share.
"The transaction was met with strong investor interest, but price was forming below the range that the company was willing to accept," said NCBJ in a market filing posted by the Jamaica Stock Exchange on Wednesday.
The filing followed a two-week travel tour to tout the investment in big cities in the US, United Kingdom and Canada. The travelling party included Michael Lee-Chin, chairman, Patrick Hylton, group managing director, Denis Cohen, deputy managing director and Yvonne Clarke, chief financial officer.
NCBJ added that potential investors raised specific concerns on the local macroeconomic uncertainty that weighed on their investment decision.
"On the advice of the company's investment bankers, the company has decided to postpone the IPO until conditions become more favourable," stated the bank.
The bank started marketing the offer on January 24 and was expected to finalise the offer price on February 6 for more than 803 million shares up for subscription.
Queries on an expected new timeline for listing were unanswered up to press time. NCBJ remains a cash-rich bank making over J$10 billion net profit in the latest financial year ending September 2012.
Croskery remained unclear as to the precise use of funds for the IPO which would have added justification for the pricing.
The IPO documents filed with the US Securities Exchange Commission speak only in broad terms of strengthening operations, increasing loans volumes and building out the bank's nationwide network - already at 38 branches and 170 automated machines.
"We intend to use the net proceeds from this offering for general corporate purposes, which may include funding organic growth through an increase in loan volume, portfolio investments and other income-generating activities; financing expansion of and improvements to our infrastructure; and pursuing potential future acquisitions and other strategic investments," the IPO document states.
This month, Portland Equity, a venture fund chaired by NCBJ's largest shareholder billionaire Michael Lee-Chin revealed plans to raise US$300 million for various projects across the region including Latin America. These projects, while undisclosed, would cover financial services, infrastructure/energy, ICT, agribusiness, consumer-oriented/retail, health care and property.
Lee-Chin, who owns about 63 per cent of the bank via various companies, is prepared to give up 13 per cent of the holdings of AIC Barbados and AIC Global Holdings to facilitate the IPO.