138 Student Living Limited (138SL) is planning to hold an extraordinary general meeting (EGM) in the coming weeks to seek approval to amend its share capital limits and float an additional public offer (APO).

On Tuesday the company held a board meeting during which it deliberated on raising additional capital via debt or equity. Following that meeting, which included financial advisor GK Capital Management Limited, 138SL’s board chose to undertake an equity raise via an APO and not a rights issue.

An APO allows the company to seek additional funds from shareholders and members of the public, contrasted with a rights issue which gives existing shareholders the right but not the obligation to subscribe to new shares in the company.

“This will allow the board to achieve its primary objectives in this equity raise of securing the targeted capital at a favourable valuation whilst giving the existing stockholders the opportunity to further participate in the growth of the company. In addition, the traded shares will become more liquid in the market,” Chairman Ian Parsard said after the board meeting.

The key resolutions to be put forward at the EGM include the increase of the authorised share capital of ordinary shares and cumulative redeemable preference shares to an unlimited authorised share capital and the issuance of up to 775,000,000 ordinary shares through a APO prospectus. Other resolutions include that any pre-emption rights to existing shareholders be disapplied for the APO, that the board of directors or an appointed committee determine the terms and conditions for the APO, and that all ordinary shares once issued and allotted be converted to stock units.

138 Student Living’s balance sheet was $9.72 billion at the end of September with $4.56 billion in equity and $5.16 billion in total liabilities, of which, $4.59 billion is debt. 138SL’s stock price peaked at $9.50 on February 14, 2022, before it declined by 15 per cent on Thursday to $4.85. 138SL’s stock price has barely trended above its initial public offering price of $4.00 compared to its preference shares which trade at $75.50 after being issued for $5.00.

138SL’s top 10 shareholders own 370,451,149 ordinary shares or 89.37 per cent of the issued shares as of September. Sagicor Group Jamaica’s pooled funds and unit trusts own the most shares at 164,501,807 shares or 39.69 per cent. The other large shareholders include pension funds, unit trusts and K Limited which is controlled by director John Lee.

At a price between $3.00 to $5.00, 138SL’s additional public offering could fetch anywhere between $2.33 billion and $3.88 billion.

Parsard has indicated in a Gleaner article that it was weighing the options of new projects which may go beyond student housing and its University of the West Indies, Mona arrangement.

138SL’s annual report is expected to be submitted by February 28 with its first-quarter results to be published by February 14. Since there is a requirement that an annual general meeting (AGM) be held 21 days after the annual report is published, the decision to hold an EGM indicates the possibility that 138SL is planning to move forward with its expected plans in short order.

138SL currently operates 1,692 beds across four locations under a 65-year concession agreement. It had an average capacity of 90 per cent for its 2022 financial year and expected to be at full capacity this semester.