Jersey is rightly proud of its reputation as a leading domicile for companies wishing to raise money on the London Stock Exchange ("LSE") and elsewhere. As at the beginning of 2012 the Crown Dependency companies (Isle of Man, Guernsey and Jersey) made up 69% of all offshore companies listed on the Main Market or AIM and 76% by way of market cap. Whilst Guernsey was ahead in terms of pure numbers of listings, Jersey dominates by way of value with a total market cap of £90,858 million. This compares well to the Island's next biggest rivals, Bermuda with £28,348 million and Guernsey on £19,220 million. Further afield Jersey's onshore rivals as yet have made no substantial penetration. Luxembourg companies come in at £3,318 million, Singapore at £504 million and Hong Kong at £3 million.
Glencore, the world's largest diversified commodities trader, chose Jersey to domicile its listing vehicle. The US$ 11 billion IPO in 2011 represented London's largest ever public offering and qualified the shares for immediate inclusion in the FTSE 100. Glencore listed on both the LSE and the Hong Kong Stock Exchange ("HKSE"). Glencore was not the only Jersey listed company to make a splash in the financial press's headlines last year. Vallar Plc, Nat Rothschild's investment vehicle, raised US$ 1.07 billion in an initial public offering in London to fund a mining acquisition.
Jersey's reputation is also growing in the Far East. Capital raising in this region was traditionally was the reserve of companies incorporated in Bermuda, BVI and the Cayman Islands. The approval of Jersey holding companies for use on the Hong Kong Stock Exchange in 2009 was significant. United Company Rusal raised US$ 2.2 billion in 2010. Rusal also had a dual listing on the HKSE. Jersey's use as a means of raising European money for Far Eastern companies has a longer pedigree with a quarter of the Chinese companies that have listed in London doing so through Jersey. The double taxation treaty ("DTA") signed with Hong Kong in February of this year will help to cement the growing reputation. This is the first DTA that Hong Kong has signed with a leading international offshore centre.
So why do investors like Jersey vehicles. In summary it comes down to three things: reputation, tax and a good legal frame work. Jersey has the leading reputation for offshore financial services centres. Overall, Jersey is placed 21st in the City of London's Global Financial Centres Index, well ahead of all its offshore rivals. It presents a tax neutral environment. Companies wishing to capital raise through public markets do not want to suffer adverse tax consequences or become subject to additional UK, or other countries, taxes. Neither do they want investors to be penalised by stamp duty generated from trading securities. Jersey companies' law follows the UK path but is more flexible. This is particularly the case in relation to distributions out of capital, share buy backs and financial assistance for the purchase of shares. Jersey shares may be settled through the CREST system.
It is also worth mentioning that Jersey, unlike some of its rivals, has a truly global brand and this is in part based on the high levels of professional service provided and its superb infrastructure. Jersey has close to 13,000 professionals working in the finance industry and no other offshore centre can boast this.
So what of the immediate future for Jersey and its role in the equity capital markets? Following intense activity in the first third of last year, capital raising slowed down dramatically. No-one has a crystal ball to predict the immediate future. The signs are mixed. China, Brazil and the emerging markets more generally are seeing a reduction in growth. Oil prices are high. But there are signs of life in the US economy and fears about a Eurozone meltdown are not as high as they were. So perhaps we will see more issuers and their advisers knocking on Jersey's financial doors later this year. But whatever the near future brings, Jersey's long term important role in the global capital markets will remain.
As originally appeared in Business Brief - Issue 280, April 2012
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