Local brokers appear to be learning how to better get their ducks lined up before the opening date for IPOs, six of which since December 2015 have all closed on the first day, with most oversubscribed within the first minute.

According to Marlene Street-Forrest, General Manager of the Jamaica Stock Exchange: “Most of our IPOs close within one minute or shortly after opening,” especially since the Junior Market started.

“Investors have become accustomed to the fact that the float – 20 per cent in the hands of at least 25 shareholders – is still not large, and with additional liquidity in the system, demand is even greater now than before,” Street-Forrest observed.

Devon Barrett, general manager VM Wealth Management which brokered the IPO for ISP Finance Services Ltd, which closed in one minute after opening on March 21, said the strategy is one of working with the client to identify and engage potential investors and “determining the right price and size of the shares”.

ISP Finance Services Ltd sought to raise $97.97 million in total from the sale of 48,982,500 shares offered at a price of $2.00 each.

Barrett stated: “There are extensive consultations with the client to determine price and size of the shares to be listed. This is coupled with promotions and other marketing efforts to ensure that potential investors fully understand the current and future value of the company being listed.”

Street-Forrest said that in general, “The broker ensures that he/she works with the prospective company in getting them ready for market, which includes proper market intelligence to see whether investors would have an appetite for the type of company coming to market.

“Selling the company is not left up to the company, but you will notice that there will be investor briefings and other strategies to sensitise persons about the company before it comes to market.

“The market – and by that I mean investors – are now understanding that there is a growing appetite for equity investments and especially at the IPO stage, so they are signalling their positions early,” she continued.

Street-Forrest advised that application forms for IPOs may be submitted in advance of the opening date. Applications will be received but not processed until the opening date.

All early applications will be treated as having been received at the same time, being 9:00 am on the opening date. All other applications will be received and processed on a first-come, first-served basis.

The success in the last three months, Street-Forrest said, was also attributable to the track record of the JSE. “Finally and by far one of the most compelling reasons is that investors are recognising that the companies listed on the Junior Market have performed well.”

Street-Forrest pointed to a blog published on March 25 and written by Wayne Beecher and Tetsuro Narita of the Multilateral Investment Fund.

The writers on the Exchange’s performance in 2015 was directly connected to its Junior Market, launched in 2009. “…,the overall growth in the JSE index mentioned at the beginning of this post was supported by an astronomical 160 per cent growth in the Junior Market index last year. True to the JSE’s hypothesis, almost all companies listed on the Junior Market used the capital raised to make significant investments in expanding their operations, which resulted in increased sales, profits, and net assets – in some cases by almost 300 per cent. Five of the listed companies are now positioned for regional expansion. While the employment figures are yet to be tabulated, some companies reported employment increased by approximately 40 per cent.”

The writers noted that 61 per cent of the companies listed in the Junior Market are in the manufacturing sector, which has been generally declining for decades.