The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Next month’s Bahamas First Holdings annual general meeting (AGM) will likely determine whether the insurance group “abandons altogether” plans to list its shares on the Bahamas International Securities Exchange (BISX), Tribune Business was told yesterday.

Patrick Ward, Bahamas First’s president and chief executive, said shareholder sentiment seemed to “shift” against a BISX listing at last year’s AGM, and the property and casualty insurance group had not moved any further ahead with plans first approved by the Board in early 2011.

While not speculating on why Bahamas First investors, in general, were against listing both the group’s ordinary shares, and preference shares and bonds, on the Bahamian exchange, Mr Ward said he believed the market’s illiquidity - and the fact share prices often failed to reflect a company’s underlying fundamentals - was a factor.

In particular, he noted that listed stock prices could be moved either way by trades of just 1,000 shares, with the end result “not truly reflecting the market value”.

“We’re not moving ahead at this time,” Mr Ward told Tribune Business on the proposed BISX listing. “It seemed as if there was a shift in sentiment by some of the shareholder base [at the last AGM].

“We’ve got an AGM coming up at the end of May, and we’ll get a sense from shareholders at that time as to whether the process will be abandoned altogether or taken up again.”

Asked why Bahamas First investor sentiment towards a BISX listing had cooled considerably over the past 24 months, Mr Ward replied: ‘I didn’t dig any deeper at that stage.”

He reiterated that among the major benefits of a BISX listing would be a better price discovery mechanism, allowing all shareholders to know the value of their respective holdings at any given time, and the possibility of diversifying the company’s investor base further.

“One of the benefits I can think of is that if you are a shareholder, you have a more transparent mechanism for valuing your holding in Bahamas First, as BISX gives you an independent valuation mechanism,” Mr Ward said.

“There are also investors who want to have equity in Bahamas First, but they’re prohibited from doing so because we’re not listed on the local exchange. Those are the two primary advantages.”

Bahamas First has a fairy diverse shareholder base already, unlike many publicly listed Bahamian companies. Its largest investor is the Canada-based Economical Insurance Group, which has a 20 per cent equity stake, with the remaining shares spread among Bahamian shareholders - none of whom has more than 10 per cent.

Mr Ward added, though, that while the reasons for a cooling of enthusiasm for a BISX listing “vary from investor to investor”, one was the additional cost and compliance burdens from being a public company.

Apart from having to deal with more regulators, in the shape of BISX and the Securities Commission, Mr Ward described the market’s structural problems as another “downside”.

Since inception, BISX has been plagued by liquidity problems and small trading volumes, due to the limited number of market participants and interaction (trades) involving major institutions.

This has often acted to depress share prices and leave them at values that do not reflect underlying earnings fundamentals.

Alluding too this, Mr Ward said the single trade volume -1,000 shares - at which a stock price could be moved was “probably too low”.

“One thousand shares can move the market valuation one way or another, and not truly reflect the market price. That’s the biggest downside for any listed company at the moment,” Mr Ward told Tribune Business.

Bahamas First Holdings’ Board of Directors first approved the listing of the company’s 36.305 million ordinary shares, together with its five million preference shares and $15 million worth of outstanding bonds, on BISX at a February 2011 meeting.

Bahamas First Holdings already meets the definition of a ‘public company’, although it is not listed on a formal exchange such as BISX. As a result, its corporate governance and other processes are much like those of BISX-listed entities, meaning listing should be relatively smooth and not require a major culture change.

“There’s no other changes to the way we operate if we list on BISX,” Mr Ward confirmed yesterday.