By JEHAN UNWALA
The Bahamas International Securities Exchange (BISX) is broken. Properly functioning stock markets require buyers and sellers. Without them, stocks simply do not trade. Too many of our BISX stocks go days, weeks or even months without a trade. Thriving stock markets are crucial for funding new industries – there is no advanced economy in the world without one – so fixing BISX is key to raising our national savings rate and reducing our over-reliance on tourism.
Lively stock markets require both small investors, who may buy a few hundred shares for personal savings, and big investors (banks, insurers, mutual funds) who may buy hundreds of thousands of shares. Our small investors buy a stock once, then never buy or sell again, come rain or shine. Our big investors ignore Bahamian stocks altogether, knowing that even if they somehow bought in, low trading means they could never sell. Changing this requires an exciting stock that captures the country’s imagination. A stock that marches its way to a big, dream-making price: $100.
Small investors, excited by the gains, would pile in. Big investors, attracted by higher trading volumes, would follow. A virtuous cycle of higher trading attracting more investors spurring higher trading would begin. Higher trading would spill over into other stocks, too, until the entire market rises on the swelling tide.
This market-leading stock needs to be backed by a successful business Bahamians know and a top-notch management team. The best candidate? AML Foods, the company behind the Solomon’s, Cost Right, Fresh Market and Domino’s Pizza brands. Every Bahamian knows these brands. And, as a shareholder for nearly two decades, I can attest to their management, skilled Board of Directors and exciting long-term growth.
Even so, AML, (currently trading at $11.50 per share, is nowhere close to becoming BISX’s first $100 stock. To get there, the Board must take seven key steps, two of which I will mention now:
First, AML Foods should become the first BISX company where every Board member owns company stock. Owning stock is the best way for board members to fully appreciate the headache low trading causes Bahamian shareholders. Five AML Board members own zero stock. This must change.
Second, in another precedent-setting move, AML Foods should pay annual Board fees in company stock, not cash. Public companies in advanced economies routinely pay their boards in stock. AML Foods pays their Board nearly a quarter of a million dollars a year in cash. They cannot skimp on leadership – if they have the best directors, they must keep them. But pay in stock, further incentivising Board members to mind the stock price.
If the AML Board believes in their stock as much as I do, they should happily make these changes. If they balk, shareholders must ask why. Why should Board members be afraid to be minority shareholders just like us?
AML Foods has more power to change BISX than any other company. Doing so requires a Board as forward thinking about their stock as they are about sales and profits. In future letters, I will discuss the next five steps AML Foods can take to produce a $100 stock price and a brighter future for shareholders, BISX and The Bahamas.