“Although saying that the laws of Barbados permit directors to issue new shares by means of a private placement (that is, selling to private investor without an initial public offering) without shareholder approval and without first offering the shares to existing shareholders, Group Chairman and CEO Dodridge Miller yesterday admitted in a statement that the private placement effectively resulted in diluting existing shareholders shares by four per cent of their previous holdings.”
… from the Caribbean360.com news story Sagicor says no money problems despite private sale of shares
Sagicor’s silent memo to its shareholders is a warning to all investors: “We, the Directors, own you.”
Early in January we covered the story of how Sagicor issued an additional 11.7 million common shares to the National Insurance Board of Barbados via a private placement at a 5% discount to the trading price on the BSE at the date of the issuance. (See BFP’s story Did Sagicor’s private placement of additional shares dilute the holdings of existing shareholders?)
What did Sagicor use the money for? Why was there no prior offering to current shareholders? Why was there no explanation to shareholders until the complaints started to roll in to the news media?
On one level, these questions don’t matter at all because everything the Sagicor Directors did was apparently legal under the laws of Barbados. So what if they reduced the value of shareholders’ assets by 4% overnight with no notice? It was all legal.
The newspaper articles have faded out, but the bad taste in the mouths of thousands of Sagicor investors still remains – which is why we’re publishing this reminder to facilitate discussion.
Moral of the Story
Let this be a lesson to Barbados investors both foreign and domestic… Under the laws of Barbados, you’re meat on the table for the big boys.