The Bahamas International Securities Exchange (BISX) has lost $2.3 million over the last two years, and requires a cash injection of $50,000 per month from the central government. However, Minister of State for Finance, Senator James Smith, remains optimistic over the exchange’s future.
The extent to which the government has been subsidising the BISX has caused criticism from some quarters, who complain that the institution is no longer viable in its present form. However, the government maintains that the exchange is a vital feature of the nation’s economy and is looking at ways to create a sustainable capital market where shares can be traded, Senator Smith explained.
The exchange is a wholly privately owned entity with 45 shareholders. It was launched in early 2000 with some $5 million in capital funding. It has 18 companies listed with a total of $1.4billion in market capitalisation. Due to the exchange’s losses of $2.3 in the two years up to June 2002, some shareholders have invested sums of οΎ£125,000 in order to keep the company afloat. There seems little likelihood of a return on their investment any time soon.
Some experts have claimed it is the BISX board’s lack of vision and an appropriate business plan that have forced the government to step in with its cash lifelines. “The board knew that it was burning cash at a significant rate, hence a plan should have been implemented long before now and not waiting on the mercy of the Government,” sources told the Nassau Guardian.
Financial giant Fidelity has also pointed the finger in the direction of the board as the reason for the BISX’s financial shortcomings in its annual newsletter published last week. Whilst the company maintained that a viable capital market was crucial to the county’s economic success, it pointed out that the government’s aim should be the survival of the market, rather than the exchange “or its wealthy shareholders”.
Fidelity also made a number of other recommendations, including a more ‘broker driven’ system of trading, especially when the government issues bonds and treasury bills to the public and when offering shares in newly privatised companies, such as BaTelCo. Other suggestions included the relaxation of controls so that foreign investment instruments could be traded, as well as closer ties with international institutions such as the New York and London stock exchanges.
Senator Smith has appointed a team of financial experts to investigate the exchange’s financial needs, due to report their findings at the end of this month. The panel is chaired by Central Bank Governor Julian Francis.
By Phillip Morton, Investors Offshore.com
