During the course of the last 18 months I have written a number of articles assessing the relative strength of the global equity capital markets. Most recently, in September 2012, I considered those markets in the context of an uncertain economic future - Europe in crisis, global economic indicators weakening and a US election on the horizon. With a constantly shifting financial landscape in the background I struggled to find a rationale for the volume of prospective IPO activity in the second half of 2012 - uncertainty and volatility, I reasoned, were surely still the enemy of any company looking to raise capital on the market. Not so it seemed as apathy evaporated and investors appeared immune to the gloomy economic data emanating from almost everywhere.
On 24 December 2012 the team listed the first of our new crop of IPO deals. Camkids a leading Chinese clothing manufacturer listed on the AIM market of the London Stock Exchange with a market capitalization of GBP63.38m. The new year represented something of a turning point as the market bounced and the bullish sentiment that I had struggled to justify in September started to make sense. Equity markets showed a strong rally in the early months of 2013 strengthening the resolve of both brokers and investors. On 27 February 2013 the Jersey team closed their second IPO of the year as Starcom, an Israeli based technology company went to market with a capitalisation of GBP14.5m.
Perhaps reflecting the general eastwards shift of global economic power, Camkids has performed particularly strongly in its first few months of trading. The group listed with an initial share price of 96.5p and as I write is up almost twenty per cent at 115p. A great performance in markets which, although consistently stronger in 2013 still remain fickle. What is also encouraging is that these two listings are reflective of the wider Jersey market. As I talk to other participants and competitors it is clear that Jersey as a whole is seeing a return on the considerable investment made by industry, Jersey Finance and our politicians in promoting the jurisdiction in developing markets. Both China and Israel have been the subject of specific campaigns and that visibility continues to drive demand for Jersey incorporated listing vehicles.
Looking forward the pipeline of companies preparing to list is just as exciting with groups in South America, Africa and Asia taking initial steps in sectors from green energy to innovative IT products. Using a Jersey company as group listing vehicle offers a number of potential benefits including:
- Jersey is a highly regulated tax neutral jurisdiction. There is no corporation tax, capital gains tax or capital transfer tax. There is no requirement for a Jersey company to make any withholding or deduction on account of Jersey tax in respect of dividend or interest payments.
- Using a Jersey company as the vehicle for an IPO may enable a foreign trading group to access London's capital markets without becoming liable to UK tax (UK tax advice should be taken and followed in every case). Mind and management of the company can be based on Jersey.
- Jersey companies with a market capitalisation of more than 10 billion are listed on a number of markets on the world's leading stock exchanges including: London Stock Exchange, Euronext, Luxembourg Stock Exchange, Stockholmsborsen, Hong Kong Stock Exchange, New York Stock Exchange and Toronto Stock Exchange.
- A Jersey public holding company is comparable to a UK PLC. Jersey Companies Law is based on similar UK legislation which is familiar to investors around the world - although Jersey law is frequently a simplified version of that which applies in the UK. Jersey's Companies Law provides a greater degree of flexibility particularly in relation to pre-emption rights, distributions and repurchases of shares. In addition the financial assistance rules have been abolished.
- The introduction of cross border merger regulations allows foreign companies to merge with a Jersey company providing potentially significant tax advantages.
- Located in the Euro time zone bridging US and Asian markets Jersey is OECD white listed and was voted no. 1 for all (onshore and offshore) jurisdictions in an International Monetary Fund report dealing with multilateral initiatives against money laundering, terrorist financing and tax evasion.
In addition to advising Jersey holding companies Appleby also advises on a number of Guernsey and Isle of Man holding vehicles looking to list on the London market. The three crown dependencies together account for more than 28% of the non UK companies listed on the London market.
This article was originally published in Business Brief, Issue 293 - May 2013
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