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After fiasco at First Citizens Govt halts planned IPOs

Thursday, April 3, 2014

Plans by Government to introduce a public offerings programme to encourage wider public participation in share ownership have been put on hold following the Initial Public Offer (IPO) controversy at state-owned commercial bank First Citizens, a source told the T&T Guardian. The sale of 634,588 First Citizens shares by the bank’s former chief risk officer Philip Rahaman exposed flaws in the process, the source explained. Plans for the public offering programme were outlined in a September 30, 2012, Ministry of Finance memo which said the First Citizens IPO would be followed by another for the T&T Mortgage Bank—a merger of the T&T Mortgage Finance Company (TTMF) and the Home Mortgage Bank (HMB). 


According to that document, an IPO was to be executed in the amount of 20 per cent shareholding of First Citizens Bank and of no more than 49 per cent of the T&T Mortgage Bank. There were also plans for a Phoenix Park IPO. The plan was to “adopt an allocation policy for promoting the widest possible participation in share ownership for each enterprise for which shares are being sold on the T&T Stock Exchange.” Locally based investment advisory firms were to be retained to assist the Finance Ministry in executing the first wave of the programme. A June 27, 2013, Cabinet minute confirmed the commencement date for the First Citizens IPO as July 15, 2013 and trading in the shares was set to begin on September 16, 2013. The 48,495,665 shares offered for sale were from Government’s 96.5 per cent shareholding in the bank and the purchase price was set at $22 for one ordinary share. Finance Minister Larry Howai announced plans for the IPOs in his 2013 Budget presentation.


According to the source, the allocation policy adopted for the IPOs was modelled after the National Enterprises Ltd (NEL) offering in 2001 and “was not amended to meet modern exigencies, including the amended Securities and Exchange Commission (SEC) legislation.” “The said allocation policy is the ministry’s documented plan, which was going to be used for the T&T Mortgage Bank and the Phoenix Park, had not Mr Rahaman’s trade revealed systemic weaknesses in the ministry’s desire to promote the widest possible participation in share ownership,” the source said. Rahaman’s job was terminated on March 25 when investigations by the FCB board revealed that he had sold all but 25,000 of the shares he purchased in the IPO to his nephew Imtiaz Rahaman, his aunt Alia Rita Rahaman and five family-owned companies, including Rahamut Service Station Ltd. Employees of First Citizens were allowed to buy a specified minimum allocation of 500 shares and could purchase up to 5,000 at a discount of ten per cent of the offer price. There was no limit on the number of shares an employee could purchase overall. However, the shares allocated to employees were heavily undersubscribed and only 3.7 million shares were taken up, including the 659,588 purchased by Rahaman. In the end, almost 50 per cent of the shares were not taken up by the employees.


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