ORO AGRI listing highlights ambitions, obstacles for Cayman stock exchange

The Cayman Islands Stock Exchange, in existence since 1996, is known as a specialized or technical stock exchange which lists predominantly mutual funds and specialized debt securities – in other words, Cayman’s traditional financial products.  

Since its first listing in 1997, the exchange has expanded into every conceivable security from derivative warrants, corporate debt securities and depositary receipts to insurance linked securities and equities.  

But on June 30, the exchange listed its first non-financial stock with Oro Agri, a company that manufactures and distributes bio-pesticides, bio-stimulants, adjuvants, liquid fertilizers and soil conditioners. 

For Valia Theodoraki, CEO of the stock exchange, it will be the first of many more equity listings. 

Especially since the market downturn in 2008, the exchange has sought to diversify away from institutional products and “go back to the grassroots of an exchange, go back to equities,” she says.  

“We don’t want to shed the institutional business because it is our bread and butter and Cayman is an institutional jurisdiction. This is where we are going to get the business, and this is who we need to continue serving, but at the same time we want to be seen as a more traditional exchange so we can serve everything from institutions to retail.”  


Brand recognition  

An important element in this strategy is the alliance with Deutsche Boerse, the German stock exchange, and its international XETRA trading platform. Although the CSX has its proprietary, in-house trading platform, the adoption of XETRA gives the exchange better brand recognition and exposure through a known trading system that every broker member worldwide can use. 

Theodoraki says Oro Agri, which trades on XETRA, is a first testament to its use, and the trading system has also been a draw for an additional broker member and another institutional equity listing.  

The goal is to attract more broker members and more companies, but this takes time, she adds. 

“We are as good as any of the big exchanges, our listing rules are IOSCO compliant and they are checked by every organization that we join.” 

Membership in IOSCO, affiliation with the World Federation of Exchanges and registration with national and international organizations are some of the means to gain additional exposure and support the reputation of the exchange. 

But to establish an internationally recognized business in equities, Theodoraki says, requires more companies like Oro Agri to take the plunge.  

Local connection  

Erroll Pullen, CEO and chairman of the company, whose largely orange oil-based products protect crops and increase yields in farming, had a personal affinity to Cayman, having lived on island for a while in 2000. He established his group’s holding company in Cayman also for the typical tax reasons that make the jurisdiction attractive for worldwide operating businesses. 

“If we had made this an American company, we would be taxed heavily on our worldwide income. Now we are not,” he explains. “We pay our taxes in America, we do the same in South Africa and around the world. But we are able to organize and negotiate tax settlements, for example, with the Dutch government.” 

Once the company has been taxed in the Netherlands, the funds can be brought to Cayman without being re-taxed. “Had that gone to the U.S. or any other way, we would be taxed again.” 

Listing on the Cayman Islands stock exchange was a good fit for Oro Agri at this stage of its development, he says, predominantly because the company is not looking to raise tens of millions of dollars. The June stock issue offered 1 million shares at $3.25.  

The group, established in Cayman Enterprise City, hopes initially to generate sufficient buzz among Cayman-based investors for its stock. 

“There is enough money to trade on the island and support what we do,” Pullen says, given that Oro Agri is an established company in a growth industry and not a startup. “I don’t see it as being a problem. The [company’s] returns are excellent already. The growth is there. There is a very low risk.”  

In the long term the company looks forward to international investors being better able to buy its shares on the Cayman Islands stock exchange. Currently international investors have to open an account with a local broker to buy the stock.  

To make it easier for non-Cayman based investors to trade CSX-listed shares, more international brokers have to become members of the exchange. But they are holding out because the exchange has only three trading equities, comprising Oro Agri, Cayman National and VBT Holdings. 


Accommodating broker members  

The CSX does its best to make the process of becoming a broker member as painless as possible by passporting brokers from recognized stock exchanges through a simple application process. There are also no trading fees on the exchange, increasing margins for the broker. 

Brokers, however, have to be able to justify the $2,000 application fee with sufficient trading volume. 

Despite a market capitalization of $170 billion and more than 3,800 securities listed since its inception, volume is an issue because most of the listed products on the CSX, such as specialist debt and mutual funds, do not trade on the exchange.  

The way forward for CSX is to broaden the types of securities that can be listed while focusing on specific sectors. The exchange revised its listing rules last year for shipping and mining companies, forestry funds and exchange traded funds.  

Other revisions concerned retail debt, which CSX listed for the first time in August with Cyprotex PLC’s fixed rate redeemable and convertible loan notes. 

The Cayman stock exchange also introduced a new specialist equity regime that enables smaller, entrepreneurial companies to attract seed investors without issuing the typical minimum of 25 percent of shares in a public offering. 

“By specialist equity we mean that the investor must invest at least $100,000 which plays to Cayman’s strength – institutional investors,” Theodoraki says. 

With specialist equity, CSX could attract newly incorporated companies that are trying to get one or two seed investors, while benefiting from the visibility, transparency and pricing mechanism on the exchange. 

Some of the companies may use CSX as a stepping stone to get to a larger exchange at a later stage of their development, she notes. “By then they will know how it works; they have a track record.” 

After all, a stock market listing and the accompanying regulatory reporting requirements represent a learning curve and a significant cost even for established international companies like Oro Agri.  

“We looked at AIM and several other exchanges, but we thought that this was the best one for us to begin with,” says James Sullivan, the company’s chief financial officer. “It is going to give us some time to build up our infrastructure on the financial side.”  

“We thought it was a good mix with the CSX wanting to expand its equity companies and we want to expand and develop synergistic relationships helping each other grow,” Sullivan says.  


From left, James Sullivan, chief financial officer, Oro Agri Inc.; David Finch, assistant corporate secretary, Oro Agri SEZC Ltd.; Colin Wilson, investment adviser, OneTRADEx; Valia Theodoraki, chief executive, CSX; Rich Ellison, director of business development, OneTRADEx; and Erroll Pullen, chief executive, Oro Agri International