Equityline Mortgage Investment Corporation (ELMIC) will be winding up its business and distributing assets to satisfy investor claims, a bitter sight for the six-year old start-up company. This occurs at the same time the company’s preference shares were suspended by Jamaica Stock Exchange (JSE) for a second time in two months.

The announcement of the winding up was announced after trading hours on Friday where Equityline CEO Sergiy Shchavyelyev noted that the company’s auditors, Grant Thornton LLP in Canada, requested Equityline withdraw its auditors report. That move resulted in the company no longer being in complinace with JSE rules regarding the availabiltiy of audited financial statements, which necessitated a second suspension of the company’s series A redeemable preference shares on Friday, July 26.

Equityline was suspended on June 4 due to its 2023 audited financials being more than 90 days beyond the original submission deadline of February 29. The preference shares were admitted back to trading on June 21, following the submission of its audited numbers earlier in that week.

However, in a new set of developments, the Ontario Securities Commission requested that Equityline cease the distribution of securities to investors, something that the company agreed to do. It was also revealed that an Equityline affilitate was served with a litigation claim, an event that affected its affiliate’s capacity to provide the listed company with funding liquidity. Equityline’s listed affiliate as per its 2023 annual report were EquityLine Services Corporation and EquityLine Financial Corporation.

Due to these events, Equityline will notify investors once a plan is finalized regarding the winding-up process, repayment details, and expected timing. Equityline’s largest series A preference shareholders are Sagicor Group Jamaica unit trust and pooled funds which own 1,759,000 or two-thirds of the 2,683,400 series A preference shares. ELMIC’s voting shares are owned by four Canadians, including two executive directors.

The winding up will see the number of companies on the JSE decline from 104 to 103 companies.

The move by Equityline to withdraw its audited financials should draw serious concern from all investors as companies rarely ever withdraw audited numbers altogether, usually making minor amendments for certain errors instead. While the company’s audited financials and annual report were removed from the JSE website, the
Jamaica Observer was able to obtain an original copy of its 2023 annual report. The company’s audited financials were overseen by engagement partner Frank Friedman. The audited numbers were then signed off by directors Sergiy Shchavyelyev and Sergiy Przhebelskyy and the board on June 18.

Equityline’s 2023 audited financials were given a qualified opinion by their auditor, the opposite of an unqualified opinion which is seen as a positive by readers of the audited financials. The opinion stated, “Management has asserted that an estimated credit loss is not required related to these balances. We were unable to obtain sufficient appropriate audit evidence to support management’s assertion and therefore were unable to determine whether any adjustments might be necessary to due from related parties, promissory notes receivable, and total current assets as at December 31, 2023, and total finance expenses, consolidated net loss and comprehensive loss and cash flows from operations for the year then ended.”

There was also a note on the company’s ability of the continue as a going concern, which simply means the ability of the firm to continue operations based on its financial position. Equityline’s shareholder deficiency, an event which occurs when liabilities exceed assets, grew from CAD$4.50 million to CAD$5.98 million ($693.09 million) for the year under review. The company’s total assets were CA$47.26 million, largely comprised of CA$26.57 million in mortgage investments, and total liabilities of CA$53.24 million, largely made up of debt obligations. Equityline issued CAD$7.51 million in series F preference shares, to cover the relative growth in assets and mounting losses which saw the company report no cash at year end. Equityline reported a CAD$1.48-million ($171.44-million) net loss in 2023.

Equityline is a Canadian company focused on acquiring mortgages and maintaining a portfolio of those mortgages to pay dividends to its various shareholders. It issued 2,683,400 series A preference shares in January 2019 at US$2 per share, which were listed on JSE. The original maturity date of the preference shares was set for January 31, 2024 but was moved to May 31 and then June 30. The preference shares traded on July 25 at US$1.265, which left them up 15 per cent in 2024 before the suspension.

This is the sixth suspension applied by JSE in 2024 for companies listed on the exchange. Apart from iCreate Limited, all of these suspensions were related to late submissions of audited financials, however all companies were admitted back to trading once they submitted their audited financials. IronRock Insurance Company Limited was admitted back to trading on July 23 following the submission of its audited numbers and first-quarter numbers.