SSL Ventures to tap the market for $250m for pipeline investments
Published:Wednesday | November 21, 2018 | 12:00 AM
With a change in business model, from music publisher to venture capital financier, and its first earnings report distributed to the market, SSL Venture Capital Jamaica is looking to raise a quarter of a billion dollars of fresh capital to pump into investment targets that it has in the pipeline.
It follows three investments made by the company, which trades as SSL Ventures, in early-stage marketing outfits in July.
SSL Ventures appears to be leaning towards the equity market as the means of raising the cash for the next round of investments that will be pumped into small and medium enterprises, but is yet to finalise the fundraising mode.
"We have a pipeline of over $250 million and it is just left for us to strategise about how we're going about funding the pipeline," said Chairman Mark Croskery in an interview with the Financial Gleaner.
"The intention is to raise more capital via rights issue or preference shares now that the results are out, so that the company can make more acquisitions in the SME space," he said.
The company is also contemplating bringing in a new partner, or a private investor. CEO Drew Gray said Stocks & Securities, which holds 80 per cent of the shares in SSL Ventures, through at least two vehicles, is prepared to give up a portion of its stake in exchange for cash infusion to fund investments.
Its three investments to date in Bar Central, Blue Dot Data Intelligence and Muse360 Integrated amounted to $100.85 million, Gray said. The investments were reflected as goodwill on SSL Ventures' cash flow statement and its balance sheet for the September quarter. Total assets of the new company topped $203 million in September, which is more than five times its holdings of $38 million last year.
Citing the quarterly revenue of $58.5 million reported by SSL Ventures, Croskery said the inflows were driven by the equity investments.
"The revenues that we're seeing at $58 million are really looking good. Already, it is looking like a company listed on the junior market. Annualised, it looks good," Croskery said.
Financial Gleaner estimates also show that the turnover reported by SSL Ventures' for its first three months nearly doubled all the revenue reported by predecessor C2W Music Limited over its six years on the junior stock market - which added up to $33.7 million at the point of its reverse takeover by Stocks & Securities.
SSL Ventures reported profit of $1.7 million for the September third quarter, reversing the $1.745 million of losses recorded by C2W in the period the year before. Over nine months, the new company is still in a loss position, having bled $5.42 million, compared with a loss of $3.4 million in the comparative 2017 period.
Money for the takeover of C2W and the first three investments made by SSL in July was raised from the issue of 141,894,027 preference shares at a fixed coupon rate of six per cent. The prefs, which were an agreed part of the rescue plan for C2W, are redeemable in five years, Croskery said.
The company expects to make its next round of investments by the first quarter of 2019.
Venture capital financing is a nascent and still-evolving market in Jamaica. It is also a risky area of financing in which backers are pouring funds into largely untested enterprises with limited track records.
Still, even though SSL Ventures itself arose from the ashes of a failed start-up, Croskery is bullish about its future viability, saying there is a clear market to be served.
"The critical thing is that we are funding and supporting SMEs that really can't get that capital from the bank," he said.
To tip the scale, those entities in which SSL Ventures invests will be provided support services in areas such as accounting and company secretary services, and corporate governance through the operation of boards and audit committees.
"By doing so, we allow them to focus on being entrepreneurs so that they can pursue contracts, grow their companies, and one day list on the stock exchange or buy other companies," Croskery said.