Notes From The Margin

April 7, 2008

Is The Barbados Stock Exchange Becoming Irrelevant? Is it already?

We on the margin were reflecting on the recent conclusion of the Neal & Massey BS&T takeover. Neal & Massey were successful of course in buying the entire company. Some 97% of shareholders willingly took the offer and the remainder were bought out by N&M following the 90% rule. (If you own 90% of a public company you can take possession of the other 10% of shares just by paying for them). So lock stock and barrel, BS&T as an independent entity is history. What was once considered the symbol of white corporate power in Barbados has been sold (but that is another post).

So what happens next? Of course the company will be de-listed from the BSE, it’s now a wholly owned subsidiary so it won’t be traded. As a result the numbers of companies on the exchange take a hit. This will be the latest in a series of reductions in the number of public companies in Barbados. Island Properties Ltd. was taken off the exchange by Colin Brewer & Tony Hoyos, Life of Barbados was taken down by the Mutual (now Sagicor), BWIA was grounded by the Trinidad Government. If we want to think back that far Plantations Ltd. went in a long agonizing slide into oblivion. Now we have BS&T joining the ranks of companies that were once public.

Along with this slow dwindling, there is a scarcity of new companies going on to the exchange. Of course unless you count Sunbeach (we won’t go any further on that one). To make matters worse there’s an overwhelming tendancy for people to buy shares and then hold onto them for long term appreciation. So we have far more buyers than sellers. The mutual funds have added a new dimension but the returns (if you take out the BS&T takeover) have been pretty much moribund.

Merging the regional exchanges will buy time, however the fact of the matter is the investment arena in Barbados is pretty stagnant. If you listen to the rumour mill, the stories floating around about “back room deals” may or may not have substance, but they don’t engender confidence in smaller investors.

The management of the exchange must see the trends, and also must realise that from a long term view, if they do not take action they will be consigned to the same file folder that currently holds BS&T.

Marginal

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January 22, 2008

Our Thoughts On The Cabinet

PM Thompson showed the first inkling of his plans for the new term by naming a cabinet which is bolstered by some of the brightest brains in the island. We on the margin are particularly pleased to see Darcy Boyce being named to the cabinet as his skill set fills the most obvious hole in the qualifications of the elected cabinet.

Another interesting move was divorcing the International Transport ministry from the Tourism ministry and placing back with Transport and Works. The previous BLP administration had considered international transport to be the handmaiden of tourism with a focus on attracting new airlift. It will be interesting to see what new direction this brings.

International Trade, Foreign Affairs, and International Business have been joined under one Minister and one Junior minister. While we can understand the linkage, given the importance of International Business to the economy, we would have been more comfortable with it being given the exclusive focus of one minister. However we will have to see what results this brings.

Perhaps the most surprising omission was that of a Deputy Prime Minister while we have seen comments on Barbados Underground that the post exists only in tradition (let’s be clear it was the opinion of a commenter not David or one of the BU family) we on the margin view the post as having considerable importance. The Deputy Prime Minister runs the country in the absence of the PM. This is true when the PM travels or (God Forbid) becomes incapacitated or dies in office. It would be easy to dismiss the latter scenario as unlikely except for the fact that it has happened twice already.

However apart from the above comments we think that Mr. Thompson’s first cabinet appears to be a credible, well thought out team. The most obvious weakness has been adequately supported and it is clear that he has put his best brains in charge of the key ministries.

We wait to see what changes in policy will come from this new configuration.

Marginal

October 25, 2007

The SC Steps In?

In a move that some would argue is long overdue, the Securities Commission stepped into the BS&T circus yesterday.

 In a statement issued late yesterday, the commission also suggested that BS&T’s 3 000 shareholders “refrain from taking any further action regarding the tendering of their shares to any and all offers until this matter has been fully ventilated and some order is restored to what has become a disorderly transaction”.

In the meantime rumours of lawsuits continue to circulate around Bridgetown.  Some of the questions being asked in particular are “Did the actions of the BS&T board in this matter result in the withdrawal of Ansa McAl’s offer?” and if the answer to that is yes…”Does the board have a legal liability to shareholders who wanted to sell their shares at $10.00?”. We on the margins don’t even pretend to know the answers to either of these questions, but in our humble opinions this whole matter is worthy of intense scrutiny.

There is enough money in question to make a lawsuit worthwhile, however there would appear to be no shortage of people to sue. One thing is for sure, this “disorderly transaction” has rattled the investing public in Barbados far more than any takeover battle before, anything less than complete transparency in this matter will result in lower confidence by investors in the local stock exchange.

The Securities Commission should intervene as the stakes are too high to let this debacle continue unchecked.

Marginal

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