Buying Shares in an Additional Public Offering (APO)

The first time a company offers its share for sale to  the public is called an Initial Public Offering (IPO). All subsequent offerings following the IPO are considered additional public offerings (APO). These shares  can be sold to the public or to private investors. JMMB Group Limited, Proven Wealth Limited and Sygnus Investments Limited, all sold shares to the public in APOs.

When one or more existing large shareholders offer all or a large portion of the shares they own, directly to the public, that is also considered an additional public offering. An example of a major shareholder selling some of their closely held shares in an APO, was when Facey Group Limited sold some of its Seprod shares to the public in 2018. When APOs are done by major shareholders, the proceeds from the sale are paid to the shareholders who sold the shares, and not to the company. In this case, Facey Group Limited received the proceeds from the APO, and not Seprod.

Why do companies have APOs?

In an APO offering, a company is returning to the capital markets, selling new shares to raise more money. Companies do APOs for various reasons. Sometimes, the company might need funding to refinance its debt or make acquisitions to grow the business. At other times, one or more of the company’s major shareholders might be interested in disposing of some or all of their shareholdings.

How does an APO affect the stock price?

An APO offering can have a big impact on a stock’s price. The stock market’s reaction to an APO usually depends on the specifics of the transaction – like the APO price, how many shares are being offered for sale, whether the company is selling newly created shares in the APO, the demand for the APO, and the company’s plans for the cash.

In some cases, the companies may benefit from the APO, because the money the companies raises  will be used to pay down expensive  debt  or to refinance it with cheaper debt. The company may also use the new capital to make new acquisitions, which in turn may result in the further growth of the company. The resulting growth in company’s profits may cause an attractive upward move in the share price.

On the other hand, if the market believes that the APO transaction may not be beneficial to the future growth of the company, or if the APO is being offered at too large a discount to the price at which the stock is trading, there may be a fall-off in the stock price. Thus, investors should be cognizant of the reasons for an APO offering by a company before choosing to participate in the offering.

You do not have to do it alone. Working with a certified financial advisor, can assist you in developing a well- thought-out plan to reach your financial goals, and can help you get there faster and easier.

If you need advice in building a diversified stock portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.

The following are the current Government of Jamaica bond prices as at July 02, 2021:

*All rates quoted are opening indicative levels in the international capital markets and are subject to change based on market conditions.

The Jamaican dollar appreciated by $0.83 relative to the US dollar week-over-week, moving from a selling rate of $151.28 on Friday, June 25th to $150.45 on Friday, July 02nd. The closing BOJ weighted average selling rates are as follows:

The following are the average Treasury bill rates:

Jamaica Stock Market

Movement of the JSE Indices

This week’s Market activity resulted from trading in 109 stocks, of which 47 advanced, 51 declined and 8 traded firm. Market volume amounted 91,773,943 units valued at over J$681,322,155.20.

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