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More Money, More Offerings
Sunday 6, October 2019

More Money, More Offerings        

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A lot of interest would have been created when JMMB announced their APO (Additional Public Offering).  But the first question posed by most people was: what is an APO?  Several people assumed it was some sort of rights issue, (and there certainly are a lot of similarities) however, let us examine the mechanics of this latest fund-raising device.  

A close examination would reveal that an APO is a secondary offering of shares, this is in contrast to an IPO (initial Public Offering) where shares are offered to the public for the first time.  In a secondary offering, shares of the company have already been listed and are traded on the stock exchange. 

There are two types of secondary offerings, they can be dilutive or non-dilutive.  Simply put, a dilutive offer creates new shares to be offered to the public, example JMMB which is offering 325 million new shares.  An example of a non-dilutive secondary offering would be the recent Access Financial transaction where Proven sold a percentage of their stake in the company.  In the case of Proven, they offered existing shares to the public, so there was no dilutive effect.

Interestingly enough, there is a similar offering called a “follow on public offer” (FPO), which seems pretty similar to a secondary offering, but what was intriguing, as I am pretty sure it  hasn’t been contemplated in Jamaica, is the ATM (this time not a machine that offers cash) but an At the Market Offering where a listed company may offer shares for sale on any given day, depending on the price.  Who knows?  Maybe some enterprising company will explore that option.

Back to the topic at hand, a secondary offering is used to raise capital or to finance debt.  Investors will generally examine the reason behind the offer because the expected growth in earnings per share from the project/acquisition etc. needs to outweigh the dilutive effects of issuing additional shares (assuming it is a dilutive secondary offering).  The company will normally add a sweetener to the deal by offering the shares at a discount so as to incentivize investors to jump on board.

The key difference between a rights issue and a secondary offering is the target market.  The rights issues are generally targeting existing shareholders and may be renounceable or non-renounceable. Renounceable shares allow a shareholder to give their rights to someone else, and the non-renounceable offers are the opposite.   In addition, existing shareholders are usually offered a certain percentage of their existing shares. However, a secondary offering, similar to an IPO, is targeted at both new and existing shareholders and there is no predetermined percentage of shares allocated to anyone.

Lastly, why do I keep mentioning the word “dilutive”.  This concept is critical for shareholders because offering new shares increases the number of shares trying to get the same pool of money (profit), otherwise known as the earnings per share.  This is why it is so important that the company offering the shares seeks enough value from the targeted transaction so that shareholders earn more per share and not less.  Happy investing!


Yanique Leiba-Ebanks, is the AVP, Pensions & Portfolio Investments at Sterling Asset Management.  Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor.  Visit our website at  Feedback: if you wish to have Sterling address your investment questions in upcoming articles, e-mail us at




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