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Bank of Montserrat issues ‘APO’ of Shares ahead of AGM

General Manager, Michael Joseph

On April 2, 2018, Bank of Montserrat Ltd. announced the launch of its prospectus of, ‘yet another Rights Issue and Additional Public Offer (APO) of shares to both our existing and potentially new shareholders.’ The Bank stated, “As you are aware our last Rights Issue and APO was held just over four years ago in 2013, for the dual purpose of augmenting the bank’s capital and diversifying the ownership of the bank.”

It invited existing shareholders, to exercise their pre-emptive rights and for new shareholders, “to take advantage of this offer to purchase BML shares made available in the APO.”

The bank then invited existing and prospective shareholders to a couple of sessions where they wooed and encouraged the purchase of the new shares; one such meeting held on March 29, 2018. Mrs. Sharmaine Francois, Asst. General Manager who led the explanations, and the General Manager, Michael Joseph answered questions in the session that was aired live on ZJB from the bank offices in Brades.

Asst. General Manager, Mrs. Sharmaine Francois,

Following the sessions, questions raised by persons highlighted among other issues, that which, “stems from the bank issuing shares at $6.50 to new shareholders, who will receive an immediate gain on their investment (as Sharmaine correctly pointed out), at the cost of existing shareholders.” This concern was detailed as seen in the following.

One of Bank of Montserrat’s shareholders, shared the concern with The Montserrat Reporter however, expressing concerns about certain statements that had been made during the promotion of the additional public offering (APO).

Warren Cassell Jr., an accountancy major at the George Washington University, is concerned that the figure quoted as the bank’s book value per share could be misleading to potential investors.

 “It appears as though the prospectus states an inaccurate figure for the bank’s book value per share. According to the most recently audited financial statements, the book value per share as at September 30, 2017 was $6.82. This is what is being quoted as the book value per share in the prospectus dated April 2, 2018,” he noted.

“My concern about quoting this figure stems from the fact that in October 2017, a material change to shareholders’ equity occurred,” Cassell Jr. continued.

He explains, “In October, 697,854 new shares were issued to existing shareholders. This action would have diluted the book value on a per share basis. In other words, using the $6.82 figure would essentially be misleading potential investors to think that the shares they are being offered to buy are worth more than they actually are.”

He says, book value per share is an accounting term used to measure the intrinsic value of a single share of a company. It is calculated by dividing a company’s total net assets by its total shares outstanding. Cassell argues that the issuance of bonus shares in October of last year would have resulted in a larger denominator in that formula which in turn would have reduced the bank’s book value per share. 

Cassell concludes by challenging the accuracy of a statement made by Mrs. Francois at the APO’s media launch on March 29. Mrs. Francois stated that subscribers to the APO would realize “an immediate capital gain” on their investment given that the book value per share was $6.82 and the price to purchase was only $6.50. Cassell argues, “This statement was also inaccurate and misleading due to the fact that the book value per share was significantly less than $6.82.”

Next week, two months later on May 30, the bank will hold its Annual General Meeting and this issue and others are expected to be raised.

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General Manager, Michael Joseph

On April 2, 2018, Bank of Montserrat Ltd. announced the launch of its prospectus of, ‘yet another Rights Issue and Additional Public Offer (APO) of shares to both our existing and potentially new shareholders.’ The Bank stated, “As you are aware our last Rights Issue and APO was held just over four years ago in 2013, for the dual purpose of augmenting the bank’s capital and diversifying the ownership of the bank.”

It invited existing shareholders, to exercise their pre-emptive rights and for new shareholders, “to take advantage of this offer to purchase BML shares made available in the APO.”

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The bank then invited existing and prospective shareholders to a couple of sessions where they wooed and encouraged the purchase of the new shares; one such meeting held on March 29, 2018. Mrs. Sharmaine Francois, Asst. General Manager who led the explanations, and the General Manager, Michael Joseph answered questions in the session that was aired live on ZJB from the bank offices in Brades.

Asst. General Manager, Mrs. Sharmaine Francois,

Following the sessions, questions raised by persons highlighted among other issues, that which, “stems from the bank issuing shares at $6.50 to new shareholders, who will receive an immediate gain on their investment (as Sharmaine correctly pointed out), at the cost of existing shareholders.” This concern was detailed as seen in the following.

One of Bank of Montserrat’s shareholders, shared the concern with The Montserrat Reporter however, expressing concerns about certain statements that had been made during the promotion of the additional public offering (APO).

Warren Cassell Jr., an accountancy major at the George Washington University, is concerned that the figure quoted as the bank’s book value per share could be misleading to potential investors.

 “It appears as though the prospectus states an inaccurate figure for the bank’s book value per share. According to the most recently audited financial statements, the book value per share as at September 30, 2017 was $6.82. This is what is being quoted as the book value per share in the prospectus dated April 2, 2018,” he noted.

“My concern about quoting this figure stems from the fact that in October 2017, a material change to shareholders’ equity occurred,” Cassell Jr. continued.

He explains, “In October, 697,854 new shares were issued to existing shareholders. This action would have diluted the book value on a per share basis. In other words, using the $6.82 figure would essentially be misleading potential investors to think that the shares they are being offered to buy are worth more than they actually are.”

He says, book value per share is an accounting term used to measure the intrinsic value of a single share of a company. It is calculated by dividing a company’s total net assets by its total shares outstanding. Cassell argues that the issuance of bonus shares in October of last year would have resulted in a larger denominator in that formula which in turn would have reduced the bank’s book value per share. 

Cassell concludes by challenging the accuracy of a statement made by Mrs. Francois at the APO’s media launch on March 29. Mrs. Francois stated that subscribers to the APO would realize “an immediate capital gain” on their investment given that the book value per share was $6.82 and the price to purchase was only $6.50. Cassell argues, “This statement was also inaccurate and misleading due to the fact that the book value per share was significantly less than $6.82.”

Next week, two months later on May 30, the bank will hold its Annual General Meeting and this issue and others are expected to be raised.