If the notion of private placement is alien to you, then let me familiarize it. Don’t be alarmed, you are not the only one. Private placement is a contemporary alternative to conventional financing. It is a new market being created by Capital Market Development Authority (CMDA) and Maldives Stock Exchange (MSE). It’s quite simple really, a piece of cake some might say. It provides an opportunity for businesses of different scale and scope to fuel their business projects and prospects. Private placement market enables businesses to approach and pitch investment avenues to numerous investors, retail and institutional – all looking for something to perfuse their earnings into, which will potentially get them a higher bunce.
The most notable feature of private placements is the perks it offers to the issuing company – company can make a private placement, without having to convert into a public limited company. This removes a hurdle that has for years deterred private companies from tapping into the market for finance and allows them to diversify their source of funds.
With private placement, the confidentiality and trade secrets of your family business (in most cases) will only be disclosed to selected investors who have invested in your company. The issuing company will have the discretion to make public disclosures, depending on the nature of the investors involved.
Not at all. Private placements provide issuers with a more flexible way of raising finance. Varied offerings, of different sizes, with or without collateral, for a short to long term maturity periods can be made to a selected category of accredited investors. This in turn offers informed investors a diversified portfolio of investment avenues.
Now that the cat's out of the bag, let’s get to know this new E-Platform coming to the market. The platform developed by Maldives Stock Exchange to operate the private placement market, acts as a matching engine between accredited issuers and investors to offer an end-to-end solution to raise finance from the market. Along with easy accessibility to potential investors, issuers can give updates (disclosures) on investments ensuring transparency and security for those investors. The platform will act as a modern-day solution for regulatory checks and balances, as well as provide market information for prospective participants of the private market.
The platform enables investors to get an insight into the business operations, financials and project details through information memorandums and disclosed financial records, prior to making an investment. It also creates an avenue for online subscriptions, making the task of investing simpler and easier.
Speedier execution of the offer process, from regulatory approval to going live for subscriptions, is efficiently ensured through the platform. The platform makes the usually costly and daunting regulatory process of raising funds less challenging for companies. This creates more opportunities for small and medium enterprises to flourish. Issuers get the opportunity to check the market appetite for investment through openings for commitments to potential investors on the platform, prior to opening the offer for subscriptions.
A technology-based solution ensures issuers, regulators and end-users (investors) a seamless solution to raise capital and finance in an easy and efficient manner. The E-Platform and the private market is intended to bridge issuers to the right skills, network and capital.
In a geographically unique nation like ours, with potential investors being dispersed across the ocean, the private placement market and the E- Platform might just be the virtual bridge needed to make the market for prospective businesses. Issuers will have access to a diverse range of willing investors, who in turn will have identified, easily accessible investment avenues to build their investment portfolio.
Private placement market is likely to encourage the entry of more businesses to the capital market for alternative financing for business growth and expansion. This new market solution is likely to have a spillover effect in the economy, with increased liquidity for businesses. Let us hope that this new innovation will boost the financial landscape of our economy.