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Dolla Financial goes for maximum with $500m IPO

Microfinance company Dolla Financial Services wants to raise $500 million from stock market investors later this month, the maximum equity raise allowed for new listings of junior market companies.

The offer at $1 per share runs from May 27 to June 10. Dolla will use the proceeds to fund acquisitions and other expansion of the business.

Half of the 500 million shares available for subscription is being sold by shareholders First Rock Private Equity and DeQuity Capital Management. Dolla Financial Chairman Ryan Reid and CEO Kadeen Mairs are owners in the respective companies.

First Rock now owns 75 per cent of Dolla Financial Services Limited and DeQuity 25 per cent. If the Dolla Financial IPO is successful, First Rock’s holdings will be diluted to 60 per cent, while DeQuity’s stake in Dolla Financial will fall to 20 per cent.

The IPO proceeds will be used to settle debt owed to the selling shareholders, expand Dolla’s loan portfolio regionally through acquisitions and organic growth, and strengthen its capital base. Dolla Financial now has an equity base of $373 million.

Dolla Financial currently operates in Jamaica and Guyana. The company has eight branches, one of which is in Guyana. On Friday, CEO and founder Kadeen Mairs told the Financial Gleaner that the company has it eyes on two new markets in the Caribbean.

“We are in the process of applying for money lending licences in two countries, one of which is the Bahamas,” he said.

Dolla Financial’s board currently comprises Ryan Reid as chairman, CEO Kadeen Mairs, Christopher Yeung, Dane Patterson, Michael Banbury and Lisa Lewis.

The company’s listing on the stock market has been a goal since 2017. After two rounds of debt financing and a restructuring of the company, Mairs says they are now ready to take on the equities market.

“We have restructured Dolla Financial, we have created a chief operating officer and a chief financial officer positions and then we will have managers for each country we operate in,” he said.

The company, which began operations in 2014, also restructured in 2018 when the board made the decision to scrap Dolla Financial’s remittance and bill payments and cambio divisions and redeploy capital into microcredit services as its new core business.

Some 48 per cent of its revenue comes from the loan product Dolla Elite, which is targeted at entrepreneurs and high net worth clients. Clients in this category typically do not operate a traditional brick and mortar business but secure the loan with fixed assets such as land, motor vehicles or equipment used in the business. The loans are specifically geared at unexpected accounts payable.

Its second largest income earner is Dolla Valu Personal, which caters to employees of both private and public companies seeking funding for personal use, whether secured or unsecured.

Its annual earnings for 2021 amounted to $130 million or seven cents per share, on revenue of $395 million.

For the first quarter ending March 2022, the company made a profit of $66 million on revenue of $141 million. Its assets were estimated at almost $1 billion, including a loan portfolio of $870 million, net of provisions for bad loans.

Dolla Financial is competing in a market of around 200 microfinance companies, in a sector that’s in the process of transitioning to central bank oversight. The implementation of the new Microcredit Act is expected to result in some amount of industry restructuring and consolidation from which Dolla Financial sees opportunities to grow its business.

“The company believes that the new act will create a more conducive environment to pursue its growth strategies, particularly through acquisition. This will result in increased market share, outreach, and economies of scale, which outweigh the cost of complying with the act,” the IPO prospectus noted.

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