Barbados ports going public
Government planning to bring to market an IPO that will broaden ownership in the island’s airport, sea port and oil company.
BRIDGETOWN, Barbados, Thursday July 5, 2012 – Within a few months, the Barbados government will float 30 per cent of its stakes in the Grantley Adams International Airport, the Barbados National Oil Company, and the Barbados Port Authority, through an Initial Public Offering (IPO).
In announcing the IPO during his recent national budget presentation, Minister of Finance and Economic Affairs Christopher Sinckler said the sale of the shares would be undertaken in a way that would ensure broad ownership and “economic democracy and market liquidity”.
Alluding to the lacklustre performance of the Barbados Stock Exchange (BSE) in recent times, Minister Sinckler said the public listing of these three major entities was expected to “inject some much needed life in[to] the exchange”.
In fact, Sinckler revealed that while the BSE more than doubled the global average for its market capitalisation – the ratio of the stock market’s capitalization to Barbados’s Gross Domestic Product is 101% compared to a global average of 55% - he lamented that the number of listed companies continued to decline and the viability of the exchange seemed under threat.
Therefore, the IPO announcement came as part of an overall strategy being implemented by government to develop the capital markets in Barbados.
In his presentation, Sinckler presented a view of a capital market system that was not meeting Barbados’s development needs.
“The available evidence therefore points to a bank-dominated capital market, an illiquid stock market dominated by a few large firms, an almost non-existent Junior market, a National Insurance Scheme desperate for suitable investments and an economy facing an acute shortage of ‘risk capital’ for the investments needed to drive a restructuring of the Barbados economy,” he said, before announcing new measures aimed at stimulating the market while meeting small companies’ capital requirements.
The main offering was 10-year tax incentives for companies who chose to list on the BSE’s Junior Stock Market. The incentives involved a mix of income tax holidays, and exemptions from withholding tax on dividends and other distributions and from transfer tax on share transfers on the Junior Market.
In order to qualify for these incentives, Sinckler said, companies needed to have a minimum of 50 shareholders with the majority shareholder owning less than 25 per cent of the shares in the company and no other shareholder owning more than five per cent. Companies that violated these criteria over the 10 year period would be severely penalised as Sinckler stated: “If at any point these are violated the company must repay the Government all taxes claimed.”