The Analysts of Taking Stock say Additional Public Offers (APOs) on the Jamaican market are unfairly viewed as negative.

An APO is when a company already listed on the stock exchange issues more shares to raise money. Some Jamaican investors have blamed APOs for falling stock prices. 

However, the analysts say these price drops are more likely caused by the state of the overall market, not the APOs themselves.

CEO of Wealth Watch JA, Julian Morrison, explained that most of the most recent APOs happened when the stock market was already in decline.

 “A lot of the interest in the market began around 2016, but that boom was coming to an end by the second half of 2019,” he said. “So when a company increases its shares in a falling market, the price will usually go down.”

In other words, the stock prices likely dropped because the market was weak, not because of the APOs. 

Morrison said that a fair judgment about APOs can’t be made until they are tested in a strong market. 

“We won’t have a balanced argument until a bull market comes back and an APO happens,” he said.

Corporate Manager at JMMB, Leovaunghni Dillon agreed, pointing out that most APOs took place during a bear market.

 “It’s kind of an unfair negative spin that’s being put on the name APOs,” he said. He believes each APO should be looked at on a case-by-case basis to see if it offers real value to investors.

The analysts also said it is normal for stock prices to fall after an APO is announced. This is because new shares are often offered at a lower price to attract buyers. 

“If you’re doing an APO, you generally have to offer it below the current market price,” Dillion explained. “That’s where you get the buying.”

He said this price drop is usually temporary. If the company performs well, the stock price should recover over time. “Once it actually closes, the company’s fundamentals should be the driver,” he said.

Overall, the analysts believe the negative views on APOs are mostly due to timing. Most APOs happened when the market was down. They suggest investors focus on how the funds from the APO will be used and look at the long-term potential of the company.