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The redemption of investor funds, currently valued at US$3.3 million, or more than $500 million in local currency, remains in limbo following the second suspension of shares in Canada-based EquityLine Mortgage Investment Corporation this summer.
The company has indicated that it will be winding up the business, following interventions by regulators in Ontario and a lawsuit filed against it by an unnamed party.
Affiliates of Sagicor Group Jamaica, the largest preference shareholder, are closely watching the developments.
“We are aware of the recent communication from the Jamaica Stock Exchange on the mandatory suspension of trading of EquityLine Mortgage Investment Corporation Class A Preferred Shares. At this time, we are closely monitoring the situation and our priority is to protect the interest of our clients,” said Sagicor in response to Financial Gleaner queries.
“We remain confident in our strategy to make informed decisions based on comprehensive analysis and due diligence, and we will continue to stay abreast of any updates to determine the best course of action.”
In late 2018, Sagicor Investments Jamaica brokered the listing of Canada-based EquityLine’s preference shares, which subsequently listed on the JSE in February 2019.
Upon the second suspension on July 26, the value of the ELMIC shares totalled US$3.3 million on the JSE. They were valued at US$5.37 million upon listing in February 2019. Entities within Sagicor hold 1.86 million or two-thirds of the total 2.68 million units. The preference shares are valued at US$1.26 per unit, one cent lower than its 52-week high.
The suspension was due to its continued breach of JSE Main Market Rule 408 which requires companies to submit their audited annual financial statement within a specified period, equivalent to 180 days after the close of their financial year. ELMIC was suspended on June 7 then reinstated on June 20 arising after submitting the audited accounts for 2023.
However, that report was subsequently withdrawn, putting the company back in breach.
EquityLine explained in a market filing its auditor, Grant Thornton, withdrew the audited financials. The withdrawal came amid disclosures regarding the regulatory issues in Canada.
“The suspension arises from a request by EquityLine Mortgage Investment Corporation’s auditors to withdraw the recently filed audit report, thereby resulting in the unavailability of audited financial statements upon withdrawal. This non-compliance with timely disclosure obligations has prompted the suspension,” said EquityLine CEO Sergiy Shchavyelyev in the market filing.
“EquityLine has received a request from the Ontario Securities Commission to cease the distribution of securities, to which EquityLine has agreed,” Shchavyelyev said.
“EquityLine’s board of directors has approved a plan to wind up operations and distribute assets upon realisation to satisfy all investor claims. Once the plan is ready to proceed, investors will be notified regarding the winding-up process, repayment details, and expected timing.”
The company also disclosed that one of its affiliates has filed a lawsuit against it.
Shchavyelyev stated that litigation would affect its capacity to provide funding liquidity to EquityLine Mortgage Investment Corporation.
The company earns from offering mortgages to Canadians who have less than perfect credit scores. The rates offered to its client were 13 per cent on average, in 2023, according to its financials. The average Canadian mortgage rate hovers around 5.7 per cent.
EquityLine’s assets were estimated at CDN$47 million, which is substantially below the forecast of CDN$228 million in its listing prospectus.
Separate from the suspension, the Jamaica Stock Exchange, in its latest corporate governance report, ranked EquityLine as a ‘C’, which is the lowest ranking.
Previously EquityLine, a Canadian company, advised Jamaican investors that it would redeem their ELMIC A shares at US$2 per unit, which would have put the full payout at US$5.37 million. The payout, which was originally set for January, was twice delayed, the last time to June 30.
Redemption would effectively end the listing of the preference shares on the JSE.
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