The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FOCOL Holdings chairman yesterday asserted that the Bahamas International Securities Exchange (BISX) is “very deficient” and “needs change” if it is to attract more major initial public offerings (IPOs) and fulfill the original vision for the country’s first-ever stock market.

Sir Franklyn Wilson, speaking after BISX’s top executive revealed progress on initiatives to add three new layers to the exchange and wider Bahamian capital markets, told Tribune Business that the development of a private listings market, crowd-funding platform and secondary market are “small potatoes” compared to the need to attract more IPOs and listings on its main Board.

Noting that there have been no publicly-traded IPOs since the last Ingraham administration, which ensured that both Commonwealth Brewery and Arawak Port Development Company (APD) were listed on BISX, he argued that the exchange needs to “become more relevant” to the wider Bahamian capital market and its participants and fulfill its original mission when launched in 2000 - to act as a pooling mechanism for equity capital investments in productive companies that will grow the economy and savings.

Asserting that it is “fundamental” for BISX to attain such an objective, Sir Franklyn told this newspaper that - if it did - it will have an “immeasurable” impact on Bahamian investors, companies and the wider economy that is equivalent to what the US capital markets do for the country’s northern neighbour.

And he hailed the selection of Senator Jerome Fitzgerald as minister of economic affairs in the second Davis administration’s Cabinet on the basis that he will have ministerial responsibility for the Government’s relations with BISX and the broader Bahamian capital markets. “My understanding is that Mr Fitzgerald will have ministerial responsibility for relations with BISX,” Sir Franklyn said.

“It is my hope that his comfort level in that space, and the relationships he has in that space, having personally chaired a BISX-listed company, will position him to lead and really look at the capital markets and how BISX can grow and become bigger, stronger and better. I have very high hopes.

“I believe that Mr Fitzgerald as minister; I wouldn’t say he is uniquely positioned, but of all the members in our Parliament he has the background and experience to really lead that charge. It’s my hope that, in five years time, if he stays there and there is no change, he can really make a difference in terms of BISX.”

Some observers, though, would argue that Mr Fitzgerald’s capital markets and corporate track record is less than stellar. RND Holdings, the cinema operator in which he was a principal investor and shareholder, exited that business after selling the movie operations side to its rival, Galleria, which is also now defunct, following successive years of heavy losses.

RND Holdings became a real estate investment trust (REIT), owning the real estate that held the cinema operations sold to Galleria. Mr Fitzgerald, who served as senior policy advisor to Prime Minister Philip Davis KC during the latter’s first administration, ultimately bought out his long-standing business partner, Brent Dean, to own two-thirds of RND Holdings’ equity.

However, he sold his entire ownership interest in RND Holdings many years ago to Colina, and the company has since been renamed as Colina Real Estate Fund owning and holding multiple investment properties.

Meanwhile, Sir Franklyn yesterday described BISX’s plans to broaden and deepen the Bahamian capital markets by launching a private market listings tier, crowd funding platform and secondary market as “like small potatoes kind of stuff to me”.

He told Tribune Business: “I’m talking about getting our capital markets to the position where they are supposed to be. BISX today is very deficient in my view. The fact there has not been a new main board listing in a long time, it’s not working.

“BISX needs change. It needs change to the point where people start listing stuff again. BISX needs change. If you want a headline from me, ‘Sir Franklyn says BISX needs change’. BISX needs to become more relevant to the capital markets so that it does what it’s intended to do. A lot of capital raisings now are happening in debt, not equity, and a lot of debt instruments are done by private placement.”

Keith Davies, BISX’s chief executive, told Tribune Business that the exchange is seeking “to cover all the bases” involved in capital formation at every conceivable market level, with the ‘rules’ governing ‘private market’ listings, share trading and transfers, and companies continuing obligations having been released for a two-week public consultation period last Friday.

Describing the private listings tier as “an incubator” for Bahamian companies, the BISX chief told this newspaper it is primarily targeted at small to medium-sized businesses which have expansion ambitions and will be seeking “larger capital injections into their operations in the future”.

The private listings tier is the first, and most junior, of three new capital-raising levels that BISX aims to launch as part of its “one-stop shop” ambitions. The next phase is the ‘crowd funding’ platform, which will effectively fill the void created by the now-defunct ArawakX, and then the next step-up is the so-called ‘secondary market’ that is set to be the last unveiled.

The secondary market will be the last of four layers to BISX and the Bahamian capital markets, lying below the top tier which is the existing ‘main board’ of publicly listed and traded companies such as Commonwealth Bank, AML Foods and Cable Bahamas. The expansion is key to the exchange’s plans to broaden and deepen the Bahamian capital markets, and better match investors with companies seeking financing so as to generate faster economic growth and job creation.

Sir Franklyn, though, argued that BISX reform is “fundamental” for growing both the wider Bahamian capital markets and the economy. “It’s one of prime minister Hubert Ingraham’s greatest legacies as far as I’m concerned, along with the late finance minister Sir William Allen. He got BISX formed,” the FOCOL Holdings chairman said. “It’s one of the lasting legacies from the Ingraham era, and I give him credit.”

He added that getting BISX and the Bahamian capital markets right would have an “immeasurable” impact and “do the equivalent of what the capital markets do for the US”. Sir Franklyn said of the exchange: “It’s been helpful, but not as good as it should have been or we want it to be.”

BISX had to be rescued by a government-sponsored bail-out enacted via the Central Bank of The Bahamas during the period 2003-2005. However, long-standing complaints surrounding liquidity - the willingness of buyers and sellers to conduct share transactions - has to be placed against the context of The Bahamas’ relatively small population size of 400,000 and exchange controls regime that limits market size. Most share owners also tend to buy and hold, rather than actively trade, shares.

Sir Franklyn, meanwhile, praised the organisers of yesterday’s Speech from the Throne. “Given the shrortage of time in which they had to do that, and the logistics that had to be extremely challenging, that was exceptionally well done,” he said. “It speaks extremely highly to all persons that had something to do with that.”