Saturday, October 23, 2010

A STOCK EXCHANGE NEEDED FOR BELIZE

A BELIZE STOCK EXCHANGE
by Ray Auxillou

One of the missing ingredients in development of Belize is a Belize Stock Exchange. There are a host of small companies in this small SWITZERLAND style country, that could raise capital through selling shares of stock. A stock market provides liquidity to investors. They the investor are able to get their money out of a company rapidly, by selling their stock. All the emphasis on development, so far since Independence has been directed toward LOANS and the making available loans for new business ventures, or making available capital for expansion of existing business ventures. There are several utility companies that could be listed in Belize on a Stock Exchange, there are even enterprises like Bowen and Bowen, the beer and coca cola company. The citrus factory is another opportunity. There are simply hundreds of small cottage industries who enjoy success but enable to expand to the next level, due to lack of capital and selling stock, or shares in a venture is a much more sure way of acquiring capital than using loans. The beauty about offering shares in a company is that the money NEVER has to be paid back on a schedule. The reward is found in dividends from profits and or from the price of stock fluctuating according to the success or failure of a company. Many developing businesses in a country like Belize would eventually become successful, if they did not have to pay interest on loans, or be thwarted in their expansionist desires by inability to qualify for loans, which have to be paid back rigorously on a stated time schedule with interest. Selling shares is a much more effective way of raising capital for development and expansion of business.
So we enter a new era, with the Belize Telemedia Communications Company known as BTL. The government nationalized a huge chunk of this company and have since then announced plans to offer the Belize public shares in the company. Accordingly about 22,069,687 shares are being offered to the public at $5 a share. The sale will be closed on December 31st, the end of this calendar year. What a STUPID thing to do this way! I´m very disappointed in the political angle to this sale, as it is a wonderful opportunity to start a STOCK EXCHANGE in Belize. To do this, the company shares being offered by this UDP government should be traded like any other country with a stock exchange , or share offering public company and let the auction place of buyers and sellers of the shares decide in the free market place the actual price of the shares. Nor should there be a cut off date for sale of these roughly 22 million shares set aside for the public participation. LIQUIDITY is what a STOCK EXCHANGE offers to the public, to compete for capital with banks and other lending institutions.
Right now these government BTL shares being sold, are fixed in price and fixed in time availability. What nonsense! How can you build a nation like this? I´m very disappointed in our Finance Minister and the Cabinet for taking this tack. This is not in my opinion a way of developing Belize. This is COLONIAL BRITISH STYLE exploitation politics.
At $5 a share, the current projected dividend for these BTL shares is 2.4% per year. Obviously the dividend is the play, for curious investors wishing to buy these shares in what is a fundamentally sound company with a future or earnings growth with the population. Effecting the sale of these shares currently are bad news in law suits by the previous owner subsidiaries and the threat of a reversal of Nationalization by the Opposition Party the PUP, who seek power in the national election about 2 years from now.
As a dividend play, the shares being offered started at a BID price of par value of $1, but since then bad news in the large convention and reorganization of the PUP Opposition party threaten any investment and purchase of these BTL shares. While technically a sound investment, the company has many BAD NEWS events coming down the line and as is customary in an auction place, the RISKS must be calculated into the SHARE PRICE in a free open market economy, without political maneuverings for reasons other than straight business and worth. The stock price valuation by potential investors is currently plummeting. On Friday last, the bid on the local scene by Belizean investors had dropped to .90 cents from the previous high of $1 a share. The FINANCE MINISTER and the CABINET are being hard nosed and sticking to the fact they want $5 a share, or they will not sell. Lordy knows what the end game planned here in the political arena with these public company shares? From a business viewpoint and that of an investor it does not make any sense.
Strangely enough, the POLITICAL PARTY RAG and propoganda paper of the current ruling party, called the GUARDIAN, announced that St. John´s Credit Union would be buying a MILLION DOLLARS worth of shares in BTL at the $5 rate. The announcement said the BOARD OF DIRECTORS of this CREDIT UNION in Belize had already approved the purchase. This could be propaganda and a red herring, as it is very hard to believe this CREDIT UNION would invest $1 million of their membership money at an expected dividend rate of 2.4%. This valuation makes the shares extremely overpriced in the market place. The BTL shares customarily used to pay off with a dividend of 15% per annum. St. Johns Credit Union ( district and town location is not known ) owns 6.25% of shares of the BELIZE UNIT TRUST, a Mutual Fund operating in Belize coming from Trinidad. The Mutual Fund is invested mostly in USA BONDS as a trading speculation. The return on capital for the Belize Unit Trust is around 5.59% yield. Why this ST. Johns CREDIT UNION Board of Directors Committee would find a 2.4% dividend in BTL attractive as an investment at $5 a share can only puzzle other outside investors. Patriotism may be the driving force here.
Local Bank C.D.´s currently earn around 7.5% for six months. Six months liquidity is not too bad for people living off their savings in Belize. This makes the action of the Board of Directors of St. Johns Credit Union even more mysterious. There is no liquidity in BTL shares, even the government says that buyers are being screened and only permitted persons may purchase shares in BTL. A very strange thing to happen and very exploitation colonial in methodology. Central Bank have just announced they have lowered the minimum savings interest rate 1% to 3.5% for bank depositers. So the WAR the Finance Minister has declared on high BANK loan and interest rates in Belize continues. This may be a smart move? Lower loan interest rates though in my opinion can never beat the fact that raising capital through selling shares in your company is a safer and more easier way of raising needed capital than a fixed interest rate loan, with a regulated payment schedule. ( Raising capital through selling shares is more advantageous for struggling enterprises, as SHARE CAPITAL NEVER has to be paid back. ) Which in most cases is ruinous to developing enterprises. Selling shares is better as a way of raising capital and one reason why we need a STOCK EXCHANGE in Belize.
So we come around to BTL share offering again. $5 a share has already been discounted in the market place, as there is no liquidity in these shares currently. Nor is the offered dividend at 2.4% a decent return on investment. The price of BTL shares in the market place, so far is as a penny stock, ( $.99 cents or less ) due mostly to the threat of the PUP winning the next election and or the various court cases currently in litigation over the next four years or so. Certainly the company is a good one, but not at this price of $5. The CABINET need to revisit this political dictated sale of BTL shares to Belizean investors. What this UDP Cabinet are doing is just not right! Such actions cannot DEVELOP Belize or stimulate our economy. Just my opinion. Watch this BLOG for current Belizean investor valuations of these BTL shares in the free market place. We will keep you informed.

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