The JSE’s Most Expensive IPO Ever (That You Almost Never Heard About). Eppley Ltd @ J$377 Per Share!

There are a few unwritten rules to Initial Public Offerings (IPOs), in Jamaica at least. First, the company announces its intention to list. Then there are weeks (sometimes months) of learning about the company, the management, and kind of business they do, before finally presenting the prospectus, and going live with the offer.

Now we’re not saying this is the ideal situation. We’d be glad if we had more companies like Eppley, because we’ve seen companies announce their intention to come on the stock market, languishing for months, before we ever see or hear anything else; something that we certainly do not encourage. Eppley is not like that.

Eppley Ltd Logo

Eppley Ltd Logo

Who or What is Eppley?

The first time I heard of Eppley, was when I glimpsed some headline somewhere that they would be listing. Wait back up! Listing? I never even heard of them before. Well there you have it, these guys are no joke. I even told another investor about the IPO today just for him to tell me that he never even heard of it or the company before – and that was today… the day the offer opened!

But never mind that, Eppley’s IPO will be more than over subscribed, if it already isn’t. Nevertheless, you should still read up about what these guys do.

Here’s Why You’ve Probably Never Heard About Them

1. They’re only raising J$82.6 million

…and get this 66.7% of the shares are already reserved (for friends, families and associates), so that leaves J$27.5 million or 73,000 shares for the public. If you add to that the fact that you have to purchase a minimum of 20 shares and add to that in multiples of 10, then you will quickly see that based on the starting price and the minimum investment, it quickly looses mass appeal.

2. We’ve never seen them

…any newspaper ads, write-ups, TV commercials or offices for them. But hey, that doesn’t mean they don’t exist… and are making big bucks. You wonder how many unknown million billion dollar companies are in Jamaica right?

3. They have big privately-held parents (and associates)

The Company is an Affiliate of Musson Investments, its largest Shareholder. Musson Investments is a wholly owned subsidiary of Musson.

The Company is also an Affiliate of General Accident which provides the Company with the necessary infrastructure to monitor and manage its investments (on a non discretionary basis), and also provides it with ancillary administrative services such as I.T. systems, and human resource and payroll administration. In consideration for these services, General Accident receives an incentive based fee which is calculated as 20% of the Company’s average return on equity that is greater than 12% per annum (the payment is based on that part of such return on equity that is above 12% only)

This is how the company is now structured in terms of ownership.

The Pre-IPO Ownership Structure of Eppley Ltd

The Pre-IPO Ownership Structure of Eppley Ltd

and don’t miss that 2nd to last line in the image below, that’s where you will fall after the IPO, the one that says General public, owning a whopping 9.17%.

Ownership structure post-IPO

Ownership structure post-IPO

4. We don’t know (or understand) what they do

…and when the media doesn’t get it, then you just don’t get it. Get it? Here’s what they say they do.

The Company manages a portfolio of loans, leases and other forms of commercial credit. In so doing, it provides a variety of credit products to corporate and professional customers, including insurance premium financing, leases, commercial loans, and other forms of credit.

Insurance premium financing involves the financing of insurance premiums for personal and commercial lines insurance contracts, generally for periods of less than a year.

Leasing involves the provision of finance lease arrangements for equipment, mostly motor vehicles, for commercial and professional clients. Commercial lending involves the provision of a variety of loans to businesses that in most instances differ in structure or collateral from loans the Directors consider to widely available in the marketplace. While insurance premium financing has been the Company’s main product since it was established in 1973 as Orrett and Musson Investment Company Limited, the Directors anticipate that commercial lending and leases will comprise an increasing share of the Company’s business following the Invitation.

5. Its New Name

The company only recently (between May 28 to June 30, 2013) changed its name from Orrett and Musson Investment Company Limited to Eppley Limited. Yes we want to know what Eppley means too.

What’s Their Plan?

The Company seeks to raise $82.6 million by inviting applications for subscription for up to 218,999 new shares from prospective investors and the reserved share applicants. The Board intends to use the proceeds of the Invitation in order to expand the capacity of the Company to provide credit facilities, and to pay the expenses of the Invitation, which the Directors believe will not exceed $7.5 million (inclusive of brokerage fees, legal fees, accountant’s fees, Registrar’s fees, filing fees, stamp duty fees, initial listing fees, marketing expenses, and GCT) after payment of related expenses.

If successful, Eppley will be the the most expensive listing on the Jamaica Stock Exchange. Currently, the most expensive stock on the market is the cross-listed Guarding Holdings at J$270.

The offer, which went live at 9:00 a.m. today Monday, 22 July 2013 will run for a week and will close at 4:00 p.m. on the Closing Date, Monday, 29 July 2013 (or before, if they choose). Until they list, we wish them all the best, but somebody please…. tell us what Eppley means!

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