DOLLA Financial Services Limited broke several records last week as its initial public offering (IPO) brought in more than $5 billion, 10 times the offer size of $500 million.

Despite no business occurring on Labour Day, investors rallied to the offer which was the largest oversubscription for a Junior Market IPO capped at $500 million, under Jamaica Stock Exchange (JSE) rules.

While the IPO was scheduled to close on June 10, it closed early on May 27 at 4:00 pm — on the same day it opened. This occurred as all JSE indices fell during that week, with $625.84 million transacted during that period and 85 stocks declining relative to the 20 advancing.

The offer saw the company seeking to raise $250 million, with First Rock Private Equity and DeQuity Capital Management Limited raising $250 million through the sale of shares. The prior record holder was Mailpac Group Limited which received over $2 billion in investor capital for a $495-million IPO in November 2019. That offer closed on the same day as it opened.

Caribbean Producers Jamaica Limited still holds the record for the most capital raised from a prospectus issue by a Junior Market company, which was $425.75 million in July 2011. Wisynco Group Limited’s IPO received applications valued at $18.8 billion in a week, despite only seeking $6.17 billion in December 2017.

The offer garnered buy, participate, and overweight recommendations by all the brokerage firms whose analyses were publicly available. Barita Investments Limited, who was a selling agent, gave the offer a fair value of $1.93 while saying that the IPO price of $1 was an attractive one. The firm also noted that the demand was likely to outstrip supply for the float available to the public, with there being a high likelihood that the stock price would surge upwards. They also listed the loan growth, operational efficiencies, and Guyana market entrance as strategic opportunities for the company.

“Consequently, we recommend that investors participate in the offer, as the company has potential for significant growth due to its expansion and growth factors along with the company listing at favourable multiples relative to the market. The company expects to see continuous strong loan portfolio growth in Jamaica, and the next five years anticipate significant growth in its Guyana loan portfolio,” the Barita report said.

JMMB Securities Limited, a selling agent, also gave a thumbs up to Dolla with a fair value of $1.81 and recommendation of outperform/buy/overweight. The report stated, “The offer is suitable for a medium- to high-risk appetite and a medium- to long-term investment horizon as the company is in the growth phase of its life cycle.”

JMMB mentioned the support of First Rock Private Equity and capital markets, the expansion of Dolla’s network to the west of Jamaica, and stabilisation of its financial performance as positives for the company. However, it mentioned the rising markets rates by the Bank of Jamaica (BOJ), the resurgence in COVID-19, disruptions to the global economy from the Russia-Ukraine war, and competition from traditional financial institutions as negatives to the company’s growth.

Proven Wealth Limited (PWL) gave the offer a fair value of $1.56 and a participate recommendation, with the offer being suited for investors with above- risk average tolerance and a long-term investment horizon. The target was derived based on the growth in the loan portfolio through equity rather than debt, the growth of its Guyanese operations, continued strategic partnerships in key industries, and the success of its innovative financial solutions for underserved parts of the market.

“CEO Kadeen Mairs has identified four (4) potential locations in Jamaica [Ocho Rios, Port Antonio, Morant Bay, and Portmore] for new branches within calendar year 2022 and has also opined on Dolla’s exploration for money lending licences in other Caricom countries — with The Bahamas being identified as a potential destination,” the PWL report said.

“The various valuation methods employed indicated that Dolla’s fair value estimate ranges from $0.63-$1.97. This represents potential downside of 37% to an upside of 97%. In balancing the potential risks, an investor with a moderate to aggressive investment profile could consider participating in the initial public offering,” stated a GK Capital Management Limited report.

VM Wealth Management Limited’s (VMWM) research department gave a $2.18 price target and a participate recommendation for the offer. VMWM was the lead broker and arranger for the offer.

The offer drew numerous new investors to the floors of JMMB and Baritam, according to general sources. Numerous persons began their investment journey through the Dolla IPO, with some new investors deploying 7 figures and one investor disposing of one position to deploy more than $10 million into the IPO. Some investors used a margin loan facility from their broker or took a loan from a commercial bank to participate in the IPO.

The provisional basis of allotment notice will be posted six business days after the offer’s closing date on the JSE’s website. This means that investors should know by June 6 how many shares they should expect, along with the size of their refunds. The JSE Listing Committee would then meet to determine if Dolla should be listed and become the 45th company to be listed on the Junior Market. It would also become the 99th company listed on the JSE.