Home' Trinidad and Tobago Guardian : January 24th 2015 Contents JANUARY 24 • 2016 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
Jane Smith* is a single mother of
a teenaged daughter and a middle
manager at First Citizens. In 2013,
she purchased 5,000 shares in
the bank s initial public offering
(IPO). Although the shares were
offered to the public at $22 a share, the Gov-
ernment---which owned 96.5 per cent of the
bank before the IPO---decided that employees
of the bank would pay $19.80, a ten per cent
discount to the offer price. In addition, Jane
took up the bank s offer of an interest-free
loan to partly finance the purchase of the
Each of the 5,000 shares that Jane bought
at the First Citizens IPO for $19.80 were worth
$35 on Friday. That means that the 5,000
shares she purchased for $99,000 in September
2013 were worth $175,000 in January 2016. It
means that Jane s investment in the bank that
she has worked at for more than 20 years is
worth $76,000 more than what she paid for
it. In technical language, the capital value of
Jane s investment has increased by 77 per cent
in the two years and four month that she has
held the shares.
But that is not the only way that Jane has
benefitted from the Government s privatisation
In the period since the IPO, First Citizens
has made four dividend payments: $0.57 in
May 2014; $0.61 in December 2014; $0.58 in
May 2015 and $0.74 last December. Those div-
idend payments mean that Jane has received
$2.50 in income. This translates into $12,500
in dividend payments.
If the dividend income and the capital gains
are added together, Jane s investment in her
bank is today worth: $187,500.
Samuel Williams* is also an employee of
First Citizens. He is a shop steward at one of
the bank s branches and, as such, defends the
interests of his fellow employees as an elected
representative of the First Citizens trade
union---the Banking, Insurance and General
Workers Union (BIGWU).
He listened to the video on YouTube in May
2013 titled, "Selling the people their own
shares" in which the union s leader, Comrade
Vincent Cabrera said: "This word "privatisa-
tion," you never could have found it in a dic-
tionary before Ronald Reagan and Margaret
Thatcher. Nobody knew what it was to pri-
vatise. We knew what it was to nationalise.
Where, in a lot of the countries of the world,
the State found it necessary to expropriate
property from private capital.
"In Cuba, Castro told them that you are
lucky to be leaving with the shirts on your
back. In the case of Trinidad, Eric Williams
used the oil money to buy it. But whether you
just took it from them, or you bought it from
them, the State took over the shares on behalf
of the people. They coming now and telling
you they are selling shares to the people. So,
if the State owes it on behalf of the people,
how could you be selling the people their own
In support of BIGWU s policy on privati-
sation, Samuel took a decision not to purchase
shares in the First Citizens IPO in 2013.
Mainly as a result of his savings habit and
the BIGWU s ability to negotiate a 17 per cent
wage increase for employees of the bank in
the period January 2009 to December 2011,
Samuel had $100,000 in savings. This was
divided between two deposit accounts at the
bank: one that paid 0.2 per cent a year and
the other that paid 0.78 per cent. At an average
rate of 0.49 per cent, Samuel received about
$1,143 in interest in the 28 months between
the IPO and today.
Samuel was fortified in his decision not to
support the IPO when he attended the sixth
biennial conference of delegates of the BIGWU
in October 2014 and heard the union s pres-
ident Vincent Cabrera say: "The policy of the
BIGWU does not support privatisation. We
will not participate in the dismantling of the
State sector. In the long run, privatisation
through divestment leads to increasing levels
Samuel would also have been fortified in
his decision not to buy shares in the First Cit-
izens IPO by the statement in the Negotiations
Report submitted to the sixth conference of
BIGWU delegates that the union was in "the
vanguard of the trade union movement during
the review period in combating the scourge
of privatisation of state enterprises, particularly
in the financial services sector, and which
experience has shown, invariably, leads to job
losses, reduced benefits for workers and enrich-
ment of private sector interests."
By January 2016, Jane would have received
$12,500 in dividend payments and the value
of her investment would have increased from
$99,000 to $175,000. Samuel, on the other
hand, would have earned $1,143 in interest on
his $100,000 in savings.
Contrary to the experience cited
in the BIGWU report, no jobs
appear to have been lost at
First Citizens as a result of
privatisation and it does not
seem that benefits have been
reduced. In fact, as 1,073 of the bank s employ-
ees did buy shares at a discounted price in
the First Citizens IPO, it can be argued that
those employees received a significant benefit
from the IPO and they were among the "private
sector interests" who were enriched by it.
But why would only 65 per cent of the
employees in the majority state-owned bank
participate in an exercise that was almost des-
tined to put money in their pockets?
If only 1,073 First Citizens employees par-
ticipated in the IPO, and the prospectus dis-
closes that, as at March 2013, the bank had
1,664 employees, that would mean 35 per cent
of the bank s employees (about 600) decided
they would not participate in the IPO. This
is despite the fact that those First Citizens
employees who bought shares in their own
bank would have received a ten per cent dis-
count on the price of the shares and an inter-
est-free loan to purchase the shares.
Were some of them persuaded by the anti-
privatisation stance of the representative trade
union? Or was it a case of some of the bank
employees at the lower end of the salary scale
not being able to afford to purchase the bank s
shares? Did the management of the bank do
enough to educate its employees about the
long-term benefits of owning shares in the
company that employs them?
At the end of the IPO process, employees
of the bank subscribed to a little more than
half of the shares allocated to them. A total
of 48,495,665 shares were available to the
investing public and the employees were allo-
cated a block of 15 per cent of the IPO, which
would have amounted to 7,274,350 shares.
What does it say that the bank s employees
only subscribed to 7.8 per cent of the total
If each of the bank s 1,664 employees had
purchased the 5,000 shares that they were
given the opportunity to buy at the discounted
price of $19.80 and with an interest-free loans,
the employees would have spent $164.73 mil-
lion. Those shares would be worth $291.20
million today and the employees would have
shared $20.8 million in dividend income.
Is the First Citizens IPO a rare and isolated
Employees of TSTT, NFM and Tringen who
purchased shares in National Enterprises Ltd
(NEL) at $4 a share at its IPO in 2001 and at
$4.75 a share in its secondary offering in 2002
would also have received significant benefits
from owning the stock over the last 15 years.
It closed at $15.97 on Friday.
The T&T NGL IPO last year will eventually
prove to be very profitable for shareholders,
who will experience a sharp increase in the
demand for the stock when its product prices
improve. The outsized future dividend stream
should attract shareholders to it.
Do T&T workers benefit from privatisation?
*Not their real names.
Used for illustration purposes.
Do workers benefit
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