Just when you thought NCB was done throwing curveballs, they’ve announced an APO… in this economy? So, what’s going on?

NCB Financial Group shocked everyone recently when they announced they’re planning an Additional Public Offer. An APO means they’re creating new shares to sell to investors.

The company said it would create 300 million new shares for sale. We don’t know the price of these new shares yet, but we could use NCB’s current stock price of around $67 as a benchmark.  At that rate, they’d be looking to raise around J$21 billion- or around US$136 million. Geez!

My next question was the same one that I’m sure you’re asking now: ‘Weh dem need so much money fah?’  Isn’t this the same company that made J$40 billion in profit last year?

Well, social media lit up with speculation that they’re raising the money to pay off former Group CEO Patrick Hylton and deputy CEO, Dennis Cohen, who were let go back in July. 

Remember, the men were asked to give up around 95 million NCBFG shares several years ago, on the condition that they’d be paid back over time.  The shares were valued at nearly $14 billion. But their time was cut short so now they want what is owed. You can check out my other NCB videos for a more in-depth look at this part of the story.

Now to make matters worse, a few days after the APO announcement, NCB Chairman Michael Lee-Chin told the Jamaica Observer that the company was still in negotiations with the former execs about their separation packages. So of course, people started trying to connect the dots and were suggesting maybe it’s a payoff. 

But speaking on Taking Stock, Keisha Bailey from ProfitJumpstrater pointed out that they can’t actually do that.

OK, so if not a pay off then what? Why try to raise so much money, especially in this economic environment where the financial markets are down and investor confidence is low?

Well, our Analysts suggested that they could be raising funds to ensure they have enough money to implement Basel three. Basel three is a new regulatory standard that will require financial institutions to have more cash in reserves. Business journalist David Rose also suggested that maybe they’re raising funds to pay off debts.

But then, they floated this idea. 

And that’s really interesting because if you remember, Michael Lee-Chin sold 22 million NCBFG shares in June.  And then there was another 16 million share sell-off a few weeks later.  That was never confirmed to be from Lee-Chin, but not many people other than him own that many shares to sell.  Who bought those shares is another big speculation. 

Soooo… it’ll be really interesting to see what happens once the APO actually opens, especially if there are any big institutional investors.

In the meantime, shareholders will vote to approve the APO at NCB’s extraordinary general meeting which should be coming up in October or November. Definitely keep an eye out for that.

And that’s the bottom line.