The ‘Great Sell-off’ caused by Dolla?

The Analysts of Taking Stock with Kalilah Reynolds say that massive interest in Dolla Financial Services’ initial public offer (IPO) is the likely reason for the major stock sell off observed on the Jamaica Stock Exchange (JSE) earlier this week.

Dolla Financial is a micro-financing solutions company, which currently operates in both Jamaica and Guyana. The company wants to list on the Junior Market of the JSE and is seeking to raise $500 million through a combined offer for sale and IPO.

Some 212.5 million shares will be available to the general public, with the remainder being reserved for company applicants and key partners. All shares are going for $1. The offer opens on May 27.

On Tuesday, the first day the market was open since Dolla issued its IPO prospectus, the Combined Index of the JSE lost more than 8000 points or 2.01%, with the Junior Market falling more than 5%.

Wealth Manager at Ideal Securities Broker, Orick Angus said that investors have shown a lot of interest in the company and its IPO. He noted that the sell-offs were most likely investors positioning themselves to take advantage of the offer.

“You tend to see that whenever an IPO like Dolla comes out. People tend to move some of their funds, whether they’re capitalising on their gains or just stocking up some of their losses to hopefully buy into the IPO,” he said.

On the other hand, Assistant Manager of Private Equity at PROVEN Wealth, Julian Morrison said that while the company has growth potential, investors should appropriately weigh the risks.

“There is some challenge though in terms of the competitive dynamics because there is Kris An Charles, Access Financial, ISP, WorldNet, Lasco Financial Services and even some of the banks,” he noted.

He also pointed out that the company has previously had issues with its equity base and cash levels.

“When you look at the equity base, the company took a beating over the last couple of years because the equity base has been diminishing. When you also look at the cash levels, they were somewhat concerning but they got an injection of capital fairly recently,” he noted.

Morrison said that the company would have to continue to create value by differentiating itself from the competition, whether through its product offering, company values, lending practices, among other things. He added that capitalising on its partnerships with strategic partners could also be beneficial in the long run.

Both analysts noted that the company has strong leadership and said that investors may see “attractive” returns in the short term based on the structure of the offer.

Angus noted, however, that investors may have to consider this stock more of a long-term investment as the company’s best days may be ahead of it.

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