HAVING been trading below its initial public offer price (IPO), real estate development and investment company First Rock Capital Holdings is buying back shares on the open market in a bid to unlocking value for its shareholders.
The publicly traded company made the disclosure in a regulatory notice to the Jamaica Stock Exchange. The company advised that, “At a meeting of the board of directors on February 23, 2022, a resolution was passed by the board to execute an open market share buyback programme of the company’s ordinary shares.” However, this buyback is not expected to exceed 10 per cent of First Rock’s share capital amounting to US$33 million. This exercise is to commence within the first quarter of 2022.Share buybacks can create value for investors in a few ways. Repurchases return cash to shareholders, who want to exit the investment. With a buyback, the company can increase earnings per share, all else equal.The same earnings pie cut into fewer slices is worth a greater share of the earnings. At the last trading on Friday, First Rock share price slipped further in value losing $0.87 to end the trading week at $10.92 with 26,000 shares exchanging hands.When the company had its IPO two years ago, the price per share was $16.67, much more than the $10.92 it is currently trading at. However, the company has managed to achieve 13 consecutive quarters of profitability and returning dividends to shareholders.
The Jamaica Observer spoke with Ryan Reid, chairman & CEO of the First Rock Group about the shares buyback at this time. In his response, Reid commented, “The truth is, the stock has traded below its net asset value since June of 2021. At the group level, we are always looking for ways to unlock value for First Rock Capital Holdings and ultimately its shareholders. This share buyback, which was duly approved by that board will see us doing just that.” He went on to state, “We remain focused and affixed on performance, despite and in spite of.” This shares buyback could be a welcome opportunity for the Airports Authority of Jamaica (AAJ) and Norman Manley International Airport (NMIA) to offload their controversial equity interest in First Rock, which was done without the proper procedures being followed.AAJ/NMIA bought the second set of First Rock shares amounting to US$2 million through its IPO in January 2020, which was done under controversial circumstances. The investment totalled US$3 million ($443 million) for 28.52 million shares split equally.