BSX Mezzanine Market

Transcription

1 BSX Mezzanine Market For Development-stage Companies The BSX Mezzanine Market offers growing E-commerce, high tech and development stage companies the opportunity to list on a recognized international stock exchange at a much earlier stage than is currently possible in any other jurisdiction. This is due in large part to the fact that the BSX restricts Mezzanine Market investment to Qualified Investors This means that access is limited to sophisticated investors only and that the BSX can rely more on full disclosure than prescriptive regulations for investor protection purposes. A Qualified Investor is deemed to be, an investor who has truthfully completed an investor suitability declaration in the form prescribed by the Exchange from time to time or in such other form as the Exchange may approve and either; (1) whose investment is not less than $100,000; or (2) who otherwise meets one of the suitability tests set out in the declaration. Subject to this restriction a company does not have to have any minimum track record, market capitalization, free float or profitability in order to qualify for a full public listing on the BSX s Mezzanine Market. However, once it is listed on the BSX the company has all the profile and prestige of being a publicly-listed entity, without having to conduct a retail IPO. In effect, the Mezzanine Market provides a form of listed private equity with greater visibility and marketability for the security, while at the same time exposing management to the process of complying with listing regulations. The Mezzanine Market thus sits perfectly -- and bridges the gap -- between a company s private placements to raise venture/angel capital and a full public offering -- hence the term Mezzanine Market.

2 Going Public Without Doing an IPO A listing on a recognized stock exchange is widely regarded as a prestigious mark of advancement for any company and adds significant marketability to its securities. Listed securities are more attractive to institutional investors outside of the USA (who often limit the amount they can invest in unlisted securities). The BSX provides an open market facility for Qualified Investors. Whilst it is unlikely that a highly-liquid secondary market in these securities will exist, the BSX listing does create the mechanism for trading -- representing an important exit strategy for institutional investors. The company s visibility is significantly enhanced, including full exposure on Bloomberg (with over 100,000 terminals worldwide), Reuters and Bridge/Telerate -- without the disadvantages of having to distract management s attention preparing for a premature retail IPO. All press releases from the company are disseminated by the BSX and -- together with the trading and pricing information of its securities -- will develop an invaluable historical profile on the financial news networks in preparation for the ultimate IPO. General Young, innovative companies with high growth potential, such as E-commerce and Technology stocks, require stock markets geared to their specific needs - markets which are easily accessible, where equity finance is readily available, and which attract international as well as domestic, institutional as well as private investor interest. Such markets must be efficient and wellregulated, providing investor confidence through demonstrable fairness and transparency, and should be structured to maximize liquidity. Small and medium-sized companies with high growth potential aim to achieve the following objectives through a listing on a recognized exchange: increase market recognition expand market share diversify their financing and shareholder base raise the capital to develop their product, start production, increase sales and recruit personnel expand abroad realize a high market value based on future growth prospects The BSX Mezzanine Market is specifically designed to meet these criteria in the following ways

3 Increased market recognition A listing on the BSX can create worldwide recognition for a company. All listed securities are added to Bloomberg, Reuters and, in the near future, the Bridge/Telerate information systems. In addition, the BSX web site at carries details on all listed securities. The BSX also formally announces all new listings and can tie this publicity in with a larger PR campaign organized by the Issuer. Expanded market share Although a Mezzanine Market listing is restricted to Qualified Investors, it represents a full public listing on a recognized stock exchange. As a result the company achieves an enhanced status as a listed and publicly traded security. This adds considerably to the prestige of the firm when dealing with customers and suppliers and helps the company to expand its market sharing. Diversification of financing and shareholder base A listing on the Mezzanine Market can be associated with a private placement fund raising. Raising public capital can assist the company to diversify its financing options beyond bank debt and pure venture capital funds. However, marketing is restricted to institutional investors and high net worth individuals so that the company does not introduce a retail shareholder base. Raising capital to develop product, start production, increase sales and recruit personnel Many institutional investors especially in Europe and Asia, where venture capital firms are not so well established prefer to invest in listed securities. In fact many institutions outside of the US will limit the amount of their assets that they may invest in unlisted securities to 10% or below. Thus, listing a company on a recognized stock exchange like the BSX ensures that the securities of the company are much more attractive and marketable to such institutions because they are listed securities. For this reason, many companies combine the Mezzanine Market listing on the BSX with a private placement fund raising round. Overseas expansion A large number of E-commerce and Technology companies are drawn to Bermuda in order to incorporate a holding company or an overseas sales organization. Two of the main attractions of Bermuda are its neutral corporate tax regime - with no profits, income or capital gains taxes and its new unique E-Commerce legislation. Putting a Bermuda company into the corporate structure thus enables the company to start its worldwide expansion. Having incorporated in Bermuda the company is attracted by the opportunity to list on the Bermuda Stock Exchange its home exchange - and thus raise its profile in Bermuda and reinforce its choice of Bermuda as its corporate domicile. Higher market value based on future growth prospects Listing on the BSX creates a publicly tradable security. Securities with a public market place are generally worth more than private equity that is not publicly tradable. In this way, a Mezzanine Market listing on the BSX assists a company to realize a higher market value for its securities.

4 The New Silk Route for the 21 st Century In summary, the BSX aims to establish the Mezzanine Market as a logical first step for issuers who wish to eventually list on another international market and create a clear Roadmap for that listing. Private companies can then list on the Mezzanine Market at the earliest stage. Once they reach the minimum standards required they can move up to this special section and thus prepare themselves properly for a full IPO. The BSX plans to further develop this special market to groom high-potential early-stage E- commerce and Technology so that they can eventually meet the full international listing standards of the exchange they choose for their ultimate IPO (e.g. adopting a big six accounting firm and a proper Board of Directors). Accordingly, the BSX will become part of a new Silk Route for entrepreneurs into the 21 st Century. New start-up companies will incorporate in Bermuda attracted by its tax neutral environment and offshore E-Commerce credentials raise venture capital from global investors and list on the BSX s Mezzanine Market on their way to a full IPO. Building a Public Profile Any company which contemplates a full public listing within the next five years is strongly recommended to consider obtaining a Mezzanine Market listing on the BSX. The public profile created by the Mezzanine Market listing will prepare the institutional market for the subsequent IPO and create a public profile in advance of a full public listing. The BSX s publications, information systems and Internet capabilities, as well as our frequent road shows extend the company s reach into the institutional investor community. Listing Requirements All listing applications for the Mezzanine Market must be sponsored by one of the BSX s Trading Members. The sponsor will guide the way through the listing process and submit the formal application on behalf of the company. The costs of obtaining a Mezzanine Market listing are minimal and comprise: BSX listing fees; Sponsorship fees; Production of a full prospectus. (The prospectus may be the same document as the private placement offering document.) Subject to the restriction to Qualified Investors and the obligation to make full disclosure, there are no other onerous qualifications for listing on the Mezzanine Market. cont

5 Listing Fees The BSX listing fee is dependent on the market capitalization of the company, as follows: Market Capitalization $ Initial Fee Annual Fee Not exceeding 10m $ 5,000 $ 5,000 50m 10,000 7, m 15,000 12, m 25,000 15, m 30,000 17,500 1,000m 35,000 20,000 Exceeding 1,000m 40,000 25,000 In the first year, the Initial and Annual Fee are both payable upon application for listing. In subsequent years only the Annual Fee is payable on each anniversary of the listing. BSX Members Trading Members BSX trading members may trade on the local market, as well as use the crossing facility. Trading Members may also sponsor applications to list on the BSX. Barrington Investments Ltd. BCB Securities Ltd. Bermuda International Securities Ltd. Brooke Securities (Bermuda) Limited Butterfield Securities Ltd. First Bermuda Securities Ltd. Hedge World Markets Ltd. Forum Securities Services G Trade Securities Ltd. Gibbons Brokerage Services Ltd. Instinet (Bermuda) Ltd. Lines Overseas Management (Bermuda) Ltd. Nomura Securities (Bermuda) Ltd. Trafalgar Securities Ltd. Global Execution Technologies Ltd. Listing Sponsors: Argonaut Financial Services Ltd. Continental Sponsors Ltd. Forum Securities Servies Harbour Financial Services Ltd. Reid Services Ltd.

6 Representative Mezzanine Market Listings There are currently a number of companies listed on the Mezzanine Market; the following is a small sampling: FairBoss Corporation FairBoss Corporation, through its wholly owned subsidiaries, provides reinsurance and related reinsurance services specializing in Employment Practices Liability Insurance and assists other insurance companies in the development and implementation of their program business. Shui Sing Holdings Limited Shui Sing Holdings Limited operates as an investment holding company, the principal assets of which comprise significant interests in Great Eagle and Sun Fook Kong. Great Eagle s shares are listed on the Hong Kong Stock Exchange and the Great Eagle Group is involved primarily in property development and investment, principally in Hong Kong as well as the investment in and the operation of hotels, both in Hong Kong and internationally. Sun Fook Kong is a private company that is involved in construction, civil engineering, building maintenance and construction management services in Hong Kong. Nordica Life (Bermuda) Ltd. Nordica provides single premium unit-linked life insurance policies primarily, but not exclusively, to clients in Europe. The principal target market, however, is high net worth individuals resident in Sweden. The policies have been developed to provide the policyholders with flexibility in the determination of their insurance needs, whether for retirement or for the financial security of the beneficiary of the policy in the event of death of the life insured. BSX Members Applications to list on the Mezzanine Market must be submitted by a BSX Trading Member, the following is a list of those companies currently offering this service: First Bermuda Group Contact: Michael Schroter Tele: schroter@fbs.bm Forum Securities Services Contact: Ede Conyers Tele: ede-conyers@forum-finacial.com LOM Group Contact: Zac Collins Tele: zac.collins@lom.bm