The Tribune

By RICHARD COULSON

ALTHOUGH denied, it can only be a disappointment to an excellent company like Cable Bahamas that its rights offering was not fully subscribed.

By the official closing date of March 4, only about 70 per cent of the ordinary shares offered to the present shareholders (of which I am one) had been taken up, so that only about $21m was received rather than the projected proceeds of about $31m.

The subscription price of $6 per share was perfectly reasonable, but, as I warned in The Tribune recently, cautious shareholders may have stayed out, despite facing dilution, because they were deterred by a lack of key financial information.

First, no statements were provided for the most recent fiscal year to December 31, 2015, and a downward earnings trend showed from 2013 to 2014. In other words, investors were looking at stale figures. What was the rush? By waiting another month or two, the essential 2015 figures could have been displayed.

Second, no projections were given, even for the current year 2016. The Offering Memorandum explained this was because the new mobile business was still in abeyance - the affiliated company that will hold the cellphone licence had not yet been organised, so it was impossible to value Cable’s 48.5 per cent stake. Quite true, but surely Cable’s existing business in The Bahamas and Florida is now predictable enough to permit a minimum earnings forecast for this year.

Of course, these shortcomings would have been immaterial if Cable Bahamas had followed the practice of launching an underwritten rights offering. In more mature capital markets, a syndicate of institutions - mainly pension funds and insurance companies - is organised to buy any shares not subscribed by the public. Although the underwriting fee is an additional expense for the issuer, it assures receipt of the expected funding. A partial form of underwriting was used in our only previous rights offering 15 years ago, which also permitted non-subscribing shareholders to sell their subscription rights to other investors. Neither mechanism was used in the present financing.

Michael Anderson of Royal Fidelity (advisor and placing agent) was a bit disingenuous in placing part of the blame on failed deliveries by our Post Office and inadequate record keeping of shareholder addresses by the Central Securities Depository. Naturally it was impossible to contact every one of the several thousand Cable shareholders, but Mr Anderson himself allowed that deals like this are put over the top by a few big investors; probably there are fewer than 50 of these parties nationally. No business is foolish enough to rely on our postal system for getting time-sensitive documents to major customers’ PO Box. The only effective way is by personal hand-delivery, followed up by a phone call to confirm receipt. That’s why investment banks have messengers on call, and a persistent sales department to round up stragglers.

There should be no excuse for a targeted addressee to claim non-delivery.