FosRich is finally ready for its rights issue. But are they gonna do it without SSL shareholders?

It’s been almost one full year since FosRich announced that it would be looking to raise new capital by doing a rights issue.

For those of you unfamiliar with FosRich, they’re a local distributor for lighting, electrical and solar products. They pretty much sell from a pin to an anchor in those areas. 

A rights issue is one way for listed companies to raise money. 

Unlike an additional public offer, which would give new shareholders a chance to buy new shares in the company, a rights issue is an offer where only existing shareholders get a chance to buy new shares at a discounted price.

Right, so back in July 2022, FosRich shareholders gave the OK for the rights issue.  They also OK’ed a 10-to-one stock split. The company ended up doing the split later that month.

Now, you’re probably wondering, ‘if they went through with the stock split… what’s the holdup with the rights issue?’

Well, a certain embattled investment firm gets some of the blame.

Let me explain. See, Stocks and Securities Limited was the lead broker for FosRich’s initial public offer back in 2017. According to FosRich, SSL shareholders represent about 25% of its overall shareholders.

But remember, earlier this year the Jamaica Stock Exchange terminated SSL’s license to operate as a member-dealer. Because of that, the Jamaica Central Securities Depository moved SSL clients’ securities to escrow accounts – that’s a temporary holding account. 

So, SSL investors have been left in limbo, unable to access their accounts and investments.

You see the problem. A rights issue is for existing shareholders, and roughly 1000 of FosRich’s shareholders can’t access their accounts. That’s bad news for the shareholders and bad news for FosRich, because that’s a whole pool of investors who would not be able to participate. So they’ve been trying to figure that out, hence the delay. 

BUT! Good news. 

At its recent AGM, FosRich said they’ve spent the last three months working on a plan and they’ve found a solution that works for the JSE and Financial Services Commission.

They said shareholders who had accounts with SSL can still participate in the offer by opening another investment account with a different broker and then showing proof that they held FosRich shares.

FosRich is expected to give more information on exactly how this will work in the coming days so lookout for that. The company hasn’t given an exact date for the offer just yet, but it should be within this next month. Only investors who were shareholders by June 2 will be able to participate. 

As for what FosRich plans to do with the funds from the rights issue. Well, the company announced a new plan called Pinnacle 2027. They’re aiming to increase revenue to 20 billion dollars and net profit to 2 billion by expanding their current business line and making acquisitions. That takes money.

Plus, there’s the FosRich superstore on Moylnes Road that should be up and running soon, and they recently announced that they will be producing transformers through a partnership with JPS. So a lot of big plans that will need funding.