Dennise Williams, Staff ReporterJamaica Money Market Brokers Limited (JMMB) has decided not to proceed with a proposed rights offer because of the current condition of the stock market.
This follows the decision taken at its July annual general meeting, when the company's management had sought and received shareholder approval for its board of directors to determine the timing and specifics of the proposed rights offer.
The company issued a statement on Friday evening that the decision was taken because of the overall market performance at this time.
During the third quarter of this year, the All Jamaica Stock Exchange (JSE) index declined by 12 per cent, while the total decline to September 30th was 13 per cent. The market had thus experienced a particularly dismal third quarter, although there have been some signs of recovery since.
At press time, JMMB executives could not be reached to discuss this statement further.
Would be safe
However, one analyst from one of the listed brokerage houses, speaking anonymously, stated, "This development is just too bad. The stock market just started to pick up with five days of positive movement of the indexes."
The analyst is of the opinion that "Despite the market conditions, JMMB's rights issue would go over well because their share exposure to the market is so wide. That's why their initial public offer in 2002 went over so well. They would be safe with going with the rights issue."
And as to other reasons that might have made the brokerage house rethink the rights issue, he said: "It could be that they are more pessimistic about the prospects for the stock market going forward. But I don't think things are all that bad. All the environmental issues that affected the market (such as oil prices and soaring inflation) seem to be behind us now. And the hurricane season is all but done now.
"I think that between now and April, the market will do very well. The only blip may come when the Prime Minister steps down. The market may react negatively if the candidate chosen is not well liked. But otherwise, I think the market will continue straight through till the budget reading in April."
Other issues
Another factor the analyst pointed to was the struggle that Capital and Credit Merchant Bank (CCMB) went through to get its rights issue taken up.
"CCMB got $1 billion of the $1.2 billion they wanted from the rights issue, and that is impressive in a down market. However, CMMB had to extend the time to take up their offer at least four times, and it seemed like they were desperate. Perhaps JMMB doesn't want to go through that."
Of course, there are substantial cash flow issues involved with a rights issue.
The analyst pointed out: "With a rights issue, you have to self-underwrite as a finance firm. That is very expensive."
JMMB recently went through a management change whereby president and chief executive officer, Keith Duncan, took over leadership from his sister, Donna Duncan-Scott.
Mrs. Duncan-Scott assumed the new part-time role of executive director for culture and leadership development for the JMMB group.
