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IPOs


The ones that got away


Glencore: The world’s biggest commodity group, its float would have been big news even in a buoyant market, but in the relative quiet of 2011, the Glencore float was the IPO story of the year – and one of the biggest in Jersey’s history. Long awaited, it initially met expectations, although some observers cried foul over the size of the company’s free float (10 per cent). The meagre proportion of shares available to investors attracted the ire of many who believed Glencore wasn’t playing fair. However, under LSE rules, Glencore did nothing wrong.


Polymetal: Another Russian giant, another small free float (only 13.8 per cent of the shares were made available to investors when Polymetal floated) the IPO was one of the biggest handled in Jersey. The silver producer netted £490.8 million ($766 million) in October 2011, and has said the cash will go toward buying out the minority shareholders as part of a reverse takeover to expand access to international investors.


Noventa: A mining company with assets in Mozambique, Noventa specialises in the extraction of tantalum. It raised money in London on AIM and then in Toronto. It first issued ordinary shares, then followed that with a tranche of preferred shares, allowing it to grow the company enormously. “The Jersey element of the deal was crucial, allowing Noventa to settle shares directly in London and Toronto,” says Ogier Partner Raulin Amy. “And it also helped that the investor register contained a lot of prestigious names, while at the same time the Jersey legal system helped investors keep their faith in the company, offering the assurance that it is being well run, with supportive advisers.”


raise capital, but the two main sources – banks and the public markets – are less likely to supply it while the economic uncertainty continues. But what of the capital markets? Surely


that money will back a good IPO story? “That’s slightly different,” says Harriss. “It’s not that there’s a shortage of available capital. In fact, there are plenty of investment institutions able to put money in equities or bonds. But there are a lot of institutions that are concerned about their own investor base requiring liquidity, therefore probably running higher levels of internal cash balances than might otherwise be the case.”


Leading the way All of this leaves the Channel Islands in a peculiar position. Both Guernsey and Jersey benefited enormously from the bull run to 2007, which had London at its heart. While times were good, the Channel Islands established themselves as the first choice for both listed funds and trading companies looking for a tax-neutral jurisdiction in which to register. That dominance is reflected in the


34 businesslife.co February/March 2012


fact that all non-UK companies on the FTSE 100 are registered in Jersey. In the 12 months to June 2011, Jersey-registered companies floated on the London Stock Exchange and AIM raised £8bn, which was over half of all new capital raised on London markets during that time. Incidentally, since its foundation in 1998, the Channel Island Stock Exchange has also enjoyed healthy growth. It recently celebrated its 4,000th listing, and now has by far the most Channel Islands listings of any global exchange, with more than 1,100. Mark Lewis, Senior Partner at Appleby


Global, believes there are three pillars that make the Channel Islands’ offering to those looking to incorporate and then join the London market. “The first is familiarity – the Jersey Company Law Regime broadly follows the UK system. Investors like the English legal system, so they feel comfortable with Jersey companies,” he explains. “Second, they like the flexibility of offshore companies, and finally they like the tax neutrality.” It is the tax element that has paved the way for the Channel Islands’ dominance of the


listings market. Under the current rules, any operating company, wherever it is based, must pay all tax liabilities – corporation tax and so on – in its home country. Incorporating the company in the UK would mean that an extra layer of corporation tax would be added. A Channel Islands registration, by contrast, doesn’t attract that slice of tax. That tax saving serves as a beacon to attract


foreign companies looking for a London listing to the Channel Islands. “They want to get the maximum capital in from the IPO, so they don’t want to have any additional tax burdens,” Lewis explains.


Emerging onto the market While the volume and number of deals might have dropped, there are some sectors where companies continue to pursue an IPO as a way of raising funds. And that isn’t limited to London. A growing number of Jersey- registered companies have also been welcomed on the Hong Kong and Shanghai exchanges recently, reflecting the importance of emerging economies in driving growth.


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