Letter by JP Morgan boss covers a wide range of topics spanning meetings and cyber security.
One of my favourite CEOs, Jamie Dimon, JP Morgan Chase, released his much-anticipated annual letter (probably the second most anticipated after the one penned by Berkshire Hathaway boss Warren Buffett) about two weeks ago.
His commentary covered a whole range of topics from boring company meetings to cyber security, trade and even making a case against earnings guidance.
But one that got my attention (and relevant to us) was his concern on the declining number of public companies. In the US public companies have declined by almost 50 per cent over two decades (from 8,090 in 1996 to 4,331 in 2016).
Although our listed numbers have inched upwards (from 48 in 2005 to 67 to date) over the years, one is right to say there’s a “stunted growth” problem. In this article, I pick some of Dimon’s suggestions I believe can help resolve the above.
But first, let’s set the context. Last month, a report, PWC 2017 Africa Capital Markets Watch, showed Kenya’s capital markets as struggling.
The report notes that, over the past five years, out of the 134 initial public offerings (IPOs) conducted by listed African companies on both African and international exchanges, Kenya only had two IPOs or less than two per cent of the total figure.
During the same time, Nigeria had four, Ghana seven, Tanzania eight and Mauritius four. On rights issues offered within the period, out of the 385 conducted, Kenya only had five or less than two per cent of the total figure. Egypt had 24, Nigeria 14, Mauritius 11 and South Africa 251.
Moreover, our beloved neighbours (Tanzania) are beginning to catch up to the game.
A requirement by their government for telecommunications companies to list shares at the Dar es Salaam Stock Exchange (DSE) delivered the single largest IPO in the history of the DSE.
Vodacom Tanzania IPO listed and raised about Sh20 billion. Reports indicate that the remaining telecoms companies are in the process of preparing for listings this year.
The Rwandan government is also re-jigging its capital markets. It recently sold 19.8 per cent of its stake in I&M Bank on the Rwandan Stock Exchange.
Back to Dimon. In the 46-page letter, he points out excessive and expensive reporting requirements, focus on short-termism (quarterly earnings) burdensome disclosures that don’t get to the core of investor concerns and shareholder meetings that focus on the trivial as some of the reasons keeping good private companies from listing.
Sounds similar. He suggests policymakers’ involvement to eliminate non-material disclosures and ensure “common-sense” corporate governance.
The latter is crucial to deal with the attractiveness that private equity (PE) companies currently enjoy.
Many PE companies often stress that it is better to be owned by them because they relatively operate with “light-touch” corporate governance. This is a matter of urgency.
As long as worthy private companies stay off-the market due to “fixable” issues, the longer investors are deprived of opportunities to participate in much of our country’s wealth creation.
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Note: The results are not exact but very close to the actual.
