Several stockbrokers are gearing up to engage existing and prospective Junior Market companies in different capital offerings as the small-cap equity capital threshold has officially moved from $500 million to $750 million.

This legal change took effect on March 13 when Governor General Patrick Allen gave his assent to the Income Tax (Amendment) Act 2025, which ratified several proposed changes announced by former Finance Minister Dr Nigel Clarke during his presentation to the 2024/2025 Budget Debate.

This legislative change means that prospective firms and companies that are already listed on the Jamaica Stock Exchange (JSE) Junior Market can now raise equity capital up to $750 million during their initial public offerings (IPOs) or secondary market offerings like rights issues or additional public offerings (APOs). In other words, whereas companies listed on the Junior Market issued share capital shouldn’t surpass the $500-million mark, that limit is now $750 million.

“Generally speaking, I believe the market should see an increase in listing activity for companies when contemplating a listing (primary or secondary). [They] will no longer be forced to aggressively suppress their valuation to fit within the prior threshold, as the case applies. A former client that is yet to list comes to mind readily,” stated stockbroker Ryan Strachan in an e-mail to the Jamaica Observer.

Companies that list on the Junior Market benefit from a 10-year income tax remission split into two periods with the first five years providing a 100 per cent tax remission and the remaining five years giving companies a 50 per cent tax remission on their applicable income tax rate. This tax benefit is subject to the company not being suspended for any breach and remaining listed for 15 years. Any company which delists or is suspended before this 15-year period becomes liable to pay all income taxes that were remitted in the past.

The Junior Market came into force in April 2009 and had its first listing in October 2009 with Access Financial Services Limited. The initial $500-million share capital limit was equivalent to US$5.63 million in April 2009. However, after 16 years, that limit was now equivalent to US$3.17 million. The new $750 million threshold translates to an equivalent amount of US$4.76 million.

“When you think about it, this adjustment aligns with inflationary trends and the evolving needs of medium-sized enterprises, making it easier for companies to raise capital and strategically expand operations, giving businesses greater flexibility to scale while maintaining the benefits of the Junior Market. This should help with the revival of the JSE, and it is expected to see existing public companies returning to the market and new companies seeking to be listed. It will also enhance liquidity in the market, stimulate investment, and ultimately improve market confidence,” Terise Kettle, senior vice-president, investment banking, Barita Investments Limited, noted in her response.

When a company lists on the Junior Market it is required to raise a minimum of $50 million and offer 20 per cent to new investors as per the applicable rules. Under the previous $500-million threshold, a company which raised the maximum $500 million in an IPO was effectively capped at a $2.50-billion valuation. That meant owners of private companies would have had to contend with smaller valuations which might not have reflected their growth potential. With the new $750-million threshold, the maximum valuation for companies raising equity capital on the Junior Market is now $3.75 billion.

“Since the announcement was made years ago, we have seen companies reach out and start taking the necessary steps to become ‘listing ready’. We have already seen some activity in the market for 2025, which signals investor interest. This suggests that more companies are likely to follow suit, leveraging the increased threshold to access capital. Overall, the amendment is likely to stimulate market activity, attract new listings, and encourage existing companies to examine their balance sheet composition seriously,” Kettle added.

Since the Junior Market’s formation, 56 companies have listed with six graduating and two delisting from the stock market. These companies have raised a combined $9.86 billion in fresh equity capital to expand their businesses. After accounting for the sale of ordinary shares by existing shareholders and other market offers, the total capital raised by companies on the Junior Market currently stands at $22.60 billion.

The remaining 48 Junior Market companies make up nearly half of the 104 companies listed on the overall JSE.

Finance Minister Fayval Williams explained in her March budget debate presentation that over the last five years companies listed on the Junior Market paid $1 billion in statutory payments, $1.6 billion in general consumption tax, and $1.6 billion in PAYE (pay as you earn) income taxes. The number of new employees for Junior Market companies between 2009 and 2024 was stated to be 40,511.

“We view this amendment as a strategic measure that reinforces the critical role of the capital markets in driving economic development. It is expected to foster greater investor confidence, stimulate business innovation, and ultimately contribute to national growth through the empowerment of our MSME sector,” noted Mischa McLeod Hines, vice-president capital markets at Sagicor Group Jamaica.

“Based on the amendment, we anticipate greater activity on the Junior Market in the months ahead. With the threshold now increased to $750 million, a broader range of MSMEs will likely be able to take advantage of the tax incentives available. As a result, more companies are likely to pursue listing on the Junior Market as they now have a wider capital-raising window while remaining eligible for the market’s tax benefits; existing Junior Market companies may be encouraged to return to the market to raise additional capital for expansion, while also allowing early investors to realise returns; the potential increase in listings and offerings will provide more investment opportunities for the Jamaican public, expanding access to wealth creation and portfolio diversification.”

Several companies have expressed an intent to go public on the Junior Market over the last five years, but a combination of high interest rates and the COVID-19 pandemic had shelved plans for many to list. The announcement regarding an increase in the threshold also saw companies park their plans to benefit from a higher valuation. There have only been five new listings over the last 2.5 years.

While it’s unknown how many existing Junior Market companies might pursue secondary market offerings in the short term from this new threshold, two companies had previously indicated plans to list their subsidiaries on the JSE. Dolla Financial Services Limited intends to list its private credit subsidiary, Ultra Financier Limited, while Jamaican Teas Limited intends to list Caribbean Dreams Foods Limited.

“While the tax incentive has been used to promote listings, the evidence indicates that other benefits of listing include increased publicity and name recognition, ability to attract talent in a currently tight job market, the ability to retain top talent with equity-based incentives, much improved corporate governance, and the ability to access other forms of capital (example, bonds),” stated Rezworth Burchenson, chief executive officer of VM Investments Limited.

The market capitalisation of the Junior Market Index closed Tuesday at $441.04 billion. Atlantic Hardware & Plumbing Company Limited listed on April 4 at $1 but is currently trading at $0.84. Several Junior Market companies are currently trading below their listing price with only six of the 14 companies that have listed since 2020 trading above IPO price.