Did the NCB APO fail?
If you listen to the post-analysis of the NCB Financial Group additional public offering (APO) from its management, you would get the distinct impression that the APO was a terrific success. But the facts do not seem to bear out this bullish analysis.
After an extension, the results revealed that $2.5 billion of the $5 billion that was anticipated by the company was raised. This is just 50 per cent of what was anticipated. One can argue that 50 per cent is a win for all intents and purposes, but this is hardly a sentiment to howl about. The fact is that the company failed dismally to realise what they wanted.
It fell short of what the company was clearly hoping would have been an oversubscription. Insofar as this assumption is true, this would have been baseless optimism considering the recent problems that have bedevilled the institution. In my view, the real reason the offer flopped is that it was overpriced, because of the aforementioned optimism and on the basis of simple mathematics. The offer was priced at $65.00 when for the two months preceding it the market price of the stock on the stock market oscillated between $61.00 and $63.00. As far as I can recall, it never reached $64.00 at the time of the expiry of the APO, even when it was extended.
Anyone doing simple arithmetic would not buy a product for more than he or she could get it. Certainly no individual would pay $65.00 for something he could get for $61.00 or $62.00. To test this practical common-sense thinking, just two days before the APO expired, I bought 170 shares of NCB on the open market at $61.99. I wonder how many retail investors bought shares like this outside of the APO, which had to be bought through dedicated brokers, some of whom missed the mark by high valuations well above the APO price.
It is interesting that it was the number of shares offered to staff that was oversubscribed. After all, this was priced at $58.75, well below the market-driven cost of the stock for the two above-mentioned months. This price was clearly in line with the market price and so one does not have to possess a degree in finance to see why this is the case.
Since the APO closed, the stock price has fallen below that level at the time of writing. In my humble, yet untutored view, the APO might have done better at a price of $60.00, which would have been more in line with what the market was saying. To date, it has not traded at the APO price of $65.00. It is my considered view that the greater portion of the $2. 5 billion was taken up by institutional and not retail investors. Perhaps NCB could disabuse this opinion.
But there are other considerations to the bombing of the APO. Despite the legendary ebullience of the chairman and other members of the top management of NCB, it would appear that there are lingering problems from the recent shake-up of the management that still plague the group. Add to this that there is no secret that a great deal of the personal shares of the chairman have been leveraged to accommodate bond debts for other businesses in which he is involved. There have been reports in recent times of extensions that have had to be sought in at least one of these issues. There is nothing wrong with using personal shares in this way. But it creates an aura of fear among investors as to what, if anything, could go wrong if these leveraged shares should become owned by another entity.
Dividends are now being paid, but is this sustainable over the long term. There is still that uncertainty among shareholders as to whether the group, especially the banking unit, is getting its mojo back. Absolute transparency, especially in a financial institution, is the sine qua non of confidence in the viability of such entity.
The Jamaican Diaspora Conference
The 10th Biennial Jamaican Diaspora Conference is now underway at Montego Bay Convention Centre. It is being held against the background of protests from sections of the Jamaican Diaspora in the United States over ongoing disagreements with policies of the Jamaican Government.
These seem to be scattered protests without any real strength that could determine important, sustained outcomes for the things that they seem to want to achieve. They amount to personal peeves from some individuals and appear to be more self-aggrandising than anything else. Such eclectic protests can only shame the country and give onlookers the impression that something of great importance is going on when this is not necessarily the case.
The conference is the place where these concerns should have been aired. But clearly, the leadership of these groups had no intention to attend and get their pet positions on the agenda. Groups such as these would be well advised that, despite the importance of the Jamaican Diaspora in the United States, it is not in fact the Jamaican Diaspora. There are Jamaicans in other parts of the world who are part of the Diaspora. In that regard, a small group driven by petulance in any part of the Diaspora will not attract any more attention than a flea-bitten dog lying by the roadside.
Seek to make a difference from inside the organisation; yapping from outside is not the way to go!
Dr Raulston Nembhard is a priest, social commentator, and author of the books Finding Peace in the Midst of Life’s Storms; Your Self-esteem Guide to a Better Life; and Beyond Petulance: Republican Politics and the Future of America. Send comments to the Jamaica Observer or stead6655@aol.com.