15 December 2004

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IPO renaissance expected in US, but will Malta follow suit?

By David Lindsay

The initial public offering renaissance US market analysts have been wrongly predicting and eagerly hoping for time and time again over the past three years appears to be finally arriving.
A slew of initial public offerings, some 17 in all, are scheduled to start trading this week and companies selling stock to the public for the first time range from across the country from flash casino operator Las Vegas Sands to furniture seller Kroll and a good mix from a number of other industries.
If the prediction holds true, this week will see the most IPOs in a single week since August 2000, when there were 26.
Perhaps some of the excitement will brush off on European and, in turn, Maltese companies. At least a couple IPOs are sorely needed at the Malta Stock Exchange so as to add much needed breadth and depth to the local equity market.
The last IPO to hit the local market was when the Malta International Airport floated itself on the Malta Stock Exchange in December 2002 as part of government’s privatisation process. Before that was the then Globe Financial Management, now the Global Group, which unleashed its IPO in March 2001. The MSE currently has 12 companies on its equity list and one on its alternative companies list.
Speaking to this newspaper in the past, Malta Stock Exchange General Manager Eileen Muscat dispensed some advice for companies toying with the idea of seeking a public listing, a path usually chosen by a company when it is short on liquidity or looking to finance an expansion. Among the other benefits are the fact that a company, after listing, becomes more marketable and more visible to the public.
“I think what companies really have to do is realise that there is this alternative,” she explains. “Now whether this alternative applies to them is another matter. This applies especially to family-owned companies, many of which are now in their third and fourth generation and there is so much dilution anyway in the shareholding… One of the biggest fears of these companies is that of losing control, which is not the case because, of course, you can choose to list only a percentage of the company.
“What is of the utmost important is to know there is this opportunity and to consider it. A lot of companies look at a listing and think it’s extremely complicated.”
She goes on to explain that being granted a listing does take some time, but not as much as one might expect, while it also might mean changes to the way the company operates and that certain obligations are placed upon the company.
However, she advises, “It’s very important to carefully consider the option before throwing it out the window and to assess the advantages and disadvantages of a listing. Of course there are also obligations tied into a listing but I have to say that the legislative framework, even for unlisted companies under the Companies Act, involves a lot of obligations with corporate governance issues finding their way even into non-listed companies.
“Yes, being granted a listing takes time – but not as much as one might expect - yes it might mean changes to the way you operate, there is a certain cost involved, there are certain obligations – but from a purely business point of view what we are trying to get through to these companies are the advantages of being listed. These include the fact that – you become much more marketable, it makes you more visible and a wide array of other advantages.
“I think what companies need to do is talk to the right people when they are making the decision, even if you don’t talk to the Exchange or the competent authority, there are a lot of people who have a lot of experience and who are in a position to advise - such as financial intermediaries, lawyers and accountants. Over the last ten years in which the Exchange has been operating they have developed a great deal of expertise and of course the operator and the regulator are both always available for information and advice.”
The US, which many times sets the precedent for the rest of the investment world, has already seen 196 IPOs so far this year, the most since the dot-com boom fizzled out in 2000.
Back in Malta, however, we can only hope that the US IPO fever is, indeed, contagious and that some, even a minimal amount of the excitement, will rub off on Malta’s businesses.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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