Two affiliated Lasco companies have broken through the $500-million ceiling on share capital for junior stock market companies, and are paying fees applicable to main market listings as a result.
But whether they will eventually migrate or remain on the junior market is still pending a decision by the companies’ boards.
Lasco Distributors Limited breached the cap at year ending March 2023, when its issued capital rose to $513 million. Lasco Manufacturing, which broke through the ceiling three years ago, in March 2020, currently has $563 million in share capital.
However, sister company Lasco Financial Services remains well within the limit set by the Jamaica Stock Exchange at $114 million.
Junior companies are required to remain within a band of $50 million to $500 million for issued capital during their life as junior market companies.
All three Lasco entities were listed in October 2010 after a restructuring that defined them as independent companies within the Lasco group.
Companies that exceed the share cap limit are required to enter into discussions with the JSE around their eligibility to remain on the junior market. However, even if the JSE approves, a company in breach would be subjected to fees applicable to companies listed on the main exchange.
“We are already paying fees applicable to the main market, so the real question is, will those companies migrate to the main market? That’s something the boards will have to decide,” Deputy Chair of the three Lasco affiliated companies, James Rawle, told the Financial Gleaner.
“But I don’t foresee that discussion happening in the immediate future; over time, but not right now.”
Graduation to the main market offers a path for companies to raise additional equity capital, but importantly, also reflects the growth of business, its increasing scope, and ability to comply with tougher governance standards.
All junior market companies are required to remain listed on the market for at least 15 years, during which they receive five years of full tax waivers and another five at 50 per cent waiver.
Since all three affiliated companies were listed on the Jamaica Stock Exchange in October 2010, their tax benefit expired on October 11, 2020, making them liable to the full corporate income tax rate, whether they remain on the junior market or not.
Both have another two years to get to the minimum 15-year requirement for junior companies to remain listed on the Jamaica Stock Exchange. Exiting the market before the minimum period rolls off would result in the tax authorities clawing back the tax benefits allowed junior companies during their first decade on the market.
For the financial year ending March 2023, Lasco Distributors made a profit of $1.35 billion, up 33 per cent; while Lasco Manufacturing made $2.08 billion, up 22 per cent. The two companies paid $267 million and $584 million in taxes, respectively, for the year.
Lasco Financial, the smallest of the three, made a profit of $214 million after paying taxes of $115 million.
The junior stock market currently has 48 listings. During its 14-year history, three companies have migrated to the main market for different reasons: Eppley at the end of 2018; Key Insurance Company in April 2020 after its acquisition by listed conglomerate GraceKennedy; and Caribbean Producers Jamaica in June 2021 after breaching the maximum share cap.
Another distribution company, Derrimon Trading, is also in breach of the cap but got approval from the JSE to remain listed on the junior market.