The importance of the prospects market in raising capital for small and medium sized enterprises and the increasing need for investor education in this sector were some of the topics of a presentation delivered by Jordan Portelli, Investment Manager at Calamatta Cuschieri, during an educational seminar held recently by the Malta Stock Exchange.
“Prospects MTF: what investors need to know” was the title of Mr Portelli’s presentation. He explained that the prospects market is a multilateral-trading facility (MTF) operated by the Malta Stock Exchange which provides financing for small and medium sized enterprises (SMEs). Through this vehicle, such companies can raise capital by issuing bonds or shares.
He explained that the majority of the current admitted issuers have raised a maximum of Eur5m and that the companies admitted on the prospects market are traded on a multilateral trading facility. In total, there are 14 companies currently listed on the MSE prospects market.
Companies considering admission to prospects MTF require the services of a corporate advisor prior to and following the admission process.
“As with the main market, the prospects market gives strong importance to the governance aspect. The role of the corporate advisor is key to advise the issuer on a number of matters such as the drafting and submission of all required documents, ensuring that the applicant has full corporate governance in place and advising on the financial sustainability forecasts,” Mr Portelli said.
In the second part of the presentation, he emphasised on important aspects that investors need to be aware of when investing in such a market, with primary focus on the admission document, known also as the indenture – a trust deed between the issuer and the investors.
“The admission document is a very important document that provides all the necessary information that investors need to know about the company, such as the use of proceeds, the coupon, interest payment dates and security,” he said.
Finally, Mr Portelli spoke about the investor safeguards in the prospects market, such as understanding whether the bond is secured to a tangible asset such as property, as well as having a proper understanding of the company’s corporate structure so as to identify the movement of cash flows. Other aspects, which are new to local investors, such as covenants were also discussed with Mr Portelli highlighting the fact that these are being introduced in new admissions, including those issues, which Calamatta Cuschieri is acting as their Corporate Advisor.