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"Cashing out"Profit belongs to the owners of a non-profit. So this profit did legally belong to Compartamos-the-NGO, IFC, ACCION, and the 21 individual shareholders.
They had a combined wealth of US$125M and they clearly knew this. They then took the decision to sell 32% of their shares in an IPO. Cashing out existing shares that they owned allowed them to extract money from the business. The IPO did not bring new money into Compartamos to fuel growth, as many of us assumed. The IPO allowed the shareholders to take $450M in cash, in exchange for 30% of their shares. Roughly 6,000 new shareholders in Compartamos owning 30% of the stock. The remaining 70% of the shares still belong to the original shareholders. In other words, the shareholders turned US$6M into US$125M in a six-year period. Then, overnight, they turned that $125M into roughly $2 Billion. That is a 300:1 return-on-investment in a six year period. The next graph shows the US$125M in the left-hand column, with the nearly invisible blue sliver representing their initial $6M investment. The right-hand column shows the $2 billion market value of the shares. They took out $450M of this $2 billion in cash, and hold the rest of the value in the shares they still own. This is a hard graph to comprehend. the left-hand bar is $125M, the equivalent of the very tall right-hand bar in the previous graph!
Consider these facts. Loan size, interest rates, profit margins, shareholders, and the IPO. Consider the "degree" of these figures in comparison with what the vast majority are doing in microfinance. This is all on a different plane. It has major ramifications for microfinance. The press is now writing regularly on the Compartamos IPO. The news will impact the rest of us in microfinance. We need to discuss this, we need to understand the ramifications and implications. Register for the ACCION web conference. Listen to what they have to say. I expect they will disagree with most, if not all, of what I am saying here. I'll be very interested to hear their side of the story. Chuck Waterfield |
This website is managed by Chuck Waterfield. If you have any questions or comments about the website, please email waterfield@microfin.com |
