Patrick van Beek

1
Dealing in Shares

• Patrick van Beek
• Director/Consultant
• 5 July 2005

2
Introduction

• What are Shares
• Shareholders Rights and Obligations
• How shares are traded
• Benefits to Shareholders
• Benefits to the Company of Issuing Shares

3
What are Shares

• Ordinary Shares are also known as common stock or
  equities
• A security evidencing ownership interest in a
  company
• Literally a share in the ownership of a Company

4
Shares - Example

• A company has issued 1,000,000 shares
• Mr A owns 1,000 shares
• Mr B owns 10,000 shares
• Mr C owns 100,000 shares

5
Rights of Shareholders

• Entitled to vote at shareholders meetings
• Typically one vote per share
• Elect board of directors
• Common shareholders also receive voting rights
  regarding other company matters such as stock
  splits and company objectives

6
Rights of Shareholders

• Entitle the holder to a share of the company's
  success through dividends and/or capital
  appreciation.
• In the event of liquidation, common shareholder
  have rights to a company's assets only after
  bondholders, other debt holders, and preferred
  stockholders have been satisfied

7
Pre-emptive Rights

• Shareholders sometimes enjoy "pre-emptive
  rights".
• Pre-emptive rights allow shareholders to maintain
  their proportional ownership in the company in
  the event that the company issues another
  offering of stock. This means that shareholders
  with pre-emptive rights have the right but not
  the obligation to purchase as many new shares of
  the stock as it would take to maintain their
  proportional ownership in the company

8
Information

• Shareholders generally have the right to certain
  information
• Under Companies Act must receive annual return
  twenty-one days prior to annual general meeting
  (Section 155)
• The Securities Industry Act greatly expands on
  information which must be sent to shareholders of
  public companies

9
SIA Information (1)

• Financial Statements as prescribed by the Council
  must be sent within 4 months to security holders
• Disclosure by Reporting Issuers Regulations
• annual accounts, auditors report, directors
  report within 6 months
• Interim reports for first six months of year
  within 6 months

10
SIA Information (2)

• Disclosure by Reporting Issuers Regulations
  notify every holder of securities without delay
• Major new developments
• Significant acquisition/disposal of assets
• Certain related party transactions
• Substantial Shareholdings
• Other information to GSC and GASCI

11
Obligations

• Generally obligations of shareholders are limited
• Must abide by articles and by-laws
• Pay for shares which have been subscribed to
• Agree to be abide by relevant laws and
  regulations

12
Share Trading

• Shares are traded in a variety of markets
• Informal, private deals
• Other the counter
• Regulated exchange
• In Guyana regulated exchange is operated by GASCI
• All public companies are eligible for trading
  provided they are registered with the GSC

13
Types of Trading

• Quote driven
• Prices are set with respect to the prices market
  makers are prepared to deal at
• Market markers will quote bid (price they will
  buy) and offer or ask (price they will sell) as
  well as volumes they are prepared to deal at
• Order Driven
• Prices are set with respect to trade prices

14
Disclaimer

• GASCI nor any of its affiliates or any of their
  officers, directors, employees or agents makes
  any recommendation regarding any securities
  issued by any of the companies identified nor the
  advisability of investing in securities generally
  for any particular individual

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Benefits (2)

• Superior Returns
• By way of Dividends
• Current dividend yields of regularly traded
  companies range from 3.2 to 12.5
• Capital Returns
• Not known in advance hence shares are a risky
  investment
• Over long periods most stock markets have shown
  positive real returns
• Caribbean Markets exceptional over last two years

16
Capital Returns
17
Information
Stock Symbol Last Trade EPS P/E Ratio Dividends paid in last 12 months Dividend Yield Notes
NBI 21.9 2.1 10.4 0.83 3.80 1
BTI 40 6.44 6.2 2.5 6.30  
CBI 13.3 5.7 2.3 0.9 6.80 1
DIH 11 0.97 11.3 0.35 3.20 1,3
JPS   4.47   1.5    
CCI   -2.23   0    
DTC 175 23.1 7.6 21.9 12.50  
GSI 15 1.56 9.6 0.68 4.50 2
SPL 46.5 3.8 12.2 3.3 7.10  
DBL 3 0.36 8.3 0.12 4.00 1
DDL 8 1.04 7.7 0.36 4.50  
PHI 6 -0.03   1 16.70  
GTI   5.38   0    
18
Issuing New Shares

• Companies may be reluctant to issue shares
  because
• they may think that it dilutes the ownership
• it requires them to disclose information about
  their business that they would not otherwise have
  to reveal

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Benefits of Issuing

• Obtain additional capital and increase the value
  of their business through public issue
• May be able to issue new shares to merge with or
  acquire other businesses.
• Most important of all, they can reduce over
  dependence on bank borrowing which can be very
  risky

20
Market Ready

• Over 250 million Guyana Dollars traded on average
  each year in secondary market
• Investors are looking for opportunities to invest
• Companies are trading at between 6 and 12 times
  earnings after tax
• Opportunity to unlock value to existing
  shareholders or raise new capital

21
Questions?
22
Dealing in Shares

• Patrick van Beek
• Director/Consultant
• 5 July 2005