Tag Archives: stock

CHAPTER 7: Which Rights and Obligations do you have as an investor in the Mexican Stock Exchange?

Capítulo 7 Derechos Y Obligaciones Como Inversionista O Emisor En La Bolsa De Valores Luis Doporto Alejandre México

By: Ximena Peinado Fabregat 

Do you want to know what your Rights and Obligations are as an investor or as an issuer in the Stock Market? We tell you a little about this.

All companies keen on investing who get their inscription certificate by the National Registry of Securities  and who additionally get the authorization National Baking and Stock Commission in order to go public, have to know the Mexican Law of the Market of Values (La Ley del Mercado de Valores by its name in Spanish). 

This law has 413 articles which englobe all of the important legal topics about the Market of Values and the Stock Exchange.

Some of the most relevant articles are: i) the imposition of administrative sanctions on those who break the law; ii) crimes; iii) market prohibitions; iv) deposit, clearing and settlement of securities; v) operating rules; and vi) investor protections, among others. The complete list of articles can be found here.

7 Articles you have to know as an investor or issuer of the Stock Market

In this Chapter, PR1ME Capital explains the 7 most important articles in the law that you need to know either as a stockholder or as a ceo willing to make their company go public on the Stock Exchange. In both cases, it is extremely recommended that you know both your rights and your obligation as a participant. 

The obligations of the issuers of securities

Article 104:

Issuers with securities  who are already registered will be required to present relevant information to the Commission and the general public through the following reports:  

Ley del Mercado de Valores
  1. Continuous reports related to corporate acts and / or agreements adopted by the corporate bodies.
  2. Quarterly reports covering the financial statements, as well as management’s comments and analysis on the issuer’s results of operation and financial situation.
  3. Annual reports that include: the annual financial statements or their equivalents, depending on the nature of the issuer, accompanied by the external audit opinion.
  4. Reports on corporate restructuring such as mergers, divisions, acquisitions or sales of assets approved by the shareholders’ meeting or the issuer’s board of directors.
  5. Reports on relevant events, in accordance with the provisions of article 105 of this Law.
  6. Reports on policies and operations
  7.  Reports on the positions that issuers hold in derivative financial instruments.
  8. The financial statements of the issuers must be prepared in accordance with accounting principles issued or recognized by the Commission.

Artículo 105: Issuers will be required to disclose through the exchange listing their securities the relevant events at the time they become aware of them and may only defer disclosure when the following conditions are met:

  1. It is not a matter of acts, facts or completed events.
  2. There is no information in the mass media.
  3. There are no unusual movements in the price or volume of operation of the securities, considering such movements to be any change in the supply or demand of the securities or in their price, which is not consistent with their historical behavior and cannot be explained with the information publicly available.

Artículo 106: Issuers with securities registered in the Registry will be obliged to immediately inform the investing public of the causes that have given rise to any of the following events:

  1. Unusual movements in the market relative to the price or volume of operation of its securities.
  2. Changes in the supply or demand of their securities or in their price, which are not consistent with their historical behavior and cannot be explained with the information available to the public.
7 Artículos Que Tieenes Que Conocer Como Inversionista O Emisor De La Bolsa De Valores

Investor protection

Article 193: The brokerage houses must use the services of natural persons to operate on the stock exchange, to carry out operations with the public for advice, promotion, purchase and sale of securities. Said authorization will be granted to natural persons who prove that they have technical quality, good repute and a satisfactory credit history.

Article 194: Brokerage firms that cannot apply the resources to the corresponding purpose on the same day of their receipt, must deposit them in a credit institution no later than the following business day or acquire shares representing the capital stock of a debt instruments investment company Or, invest them in short-term reports on government securities.

Article 196: Brokerage firms may not dispose of the resources received from a client or their securities for purposes other than those ordered or contracted by him.

Article 197: Brokerage firms may not carry out operations in which conditions and terms are agreed that deviate significantly from the healthy uses and practices of the market, such as unusual movements in the market related to the price or volume of operation of their securities.

In addition to this series of guidelines, the ‘Single Circular of Issuersof the National Banking and Securities Commission (CNBV by its acronym in Spanish) has other general provisions for participants in the stock market, in which we can find: 

Ley del Mercado de Valores
  1. The importance of the company to comply with all the necessary requirements to be able to be listed on the Mexican Stock Exchange, such as having the registration data in the Public Registry of Commerce, as well as a certificate signed by the secretary of the board of directors that authenticates the powers of the legal representative; a copy of the constituent deed of the station; the board agreement for the issue of securities; financial statements audited with a favorable opinion; the project of the placement contract to be signed with the Placement Intermediary, among others.
  2.  Foreign companies that wish to register their shares in the Mexican Stock Exchange have to do the process in Spanish and be made up of each security they intend to register.

In addition to the details of the registration with public offering, the CNBV also details in its provisions the regularization around the cancellation of the subscription, the maintenance of the securities on the stock exchange, the trading systems, the shares and the ordinary participation certificates. on unregistered shares, the acquisition of shares by their own issuers and the constant information that must be provided to the CNBV, the stock markets and the investing public.

What are the requirements for listing on the exchange?

This last section specifies that the corporation has to present the following information and documents from time to time.

Annually: 

  1. Present financial information and opinion to the Commission; or a report from the board of directors presented to the ordinary general shareholders’ meeting that decides on the results of the fiscal year, authenticated by the secretary of the aforementioned board, as well as a report from the commissioner and, in the case of public limited companies that promote stock market investment, report of the committee that performs the functions in matters of corporate practices
  2. The annual financial statements.
  3. Communication signed by the secretary of the board of directors, stating the updated status kept by the minutes books of shareholders’ meetings, sessions of the board of directors, registration of shares and, in the case of stock companies with variable capital, the record book of increases and decreases in capital stock.

Per trimester: 

  1. The financial statements, as well as the economic, accounting and administrative information required in the corresponding electronic formats, comparing at least the figures for the quarter in question with the financial statements of the previous year. This must be done within 20 business days after the end of each of the first quarters of the fiscal year and within 40 business days after the end of the fourth quarter.

Each month:

  1. Within 15 working days of the month immediately following that to which the information corresponds, in the case of fiduciary titles on credits acquired in mass, such as individual loans to housing or consumption, among others, and that due to its homogeneous characteristics, information on your collection, late payment and prepayment.
  2. Additionally, they must present to the Commission and to the exchange, a certificate that identifies the period to which the monthly information corresponds, signed by the legal representative of the trustee and the legal representative of the administrator or operator of the assets.

It is important to note that six business days before the listing process even takes place, the following notices must be given:

a) Notice to shareholders for the exercise of the right of preference that corresponds to them, due to increases in the share capital and the consequent issue of shares whose amount must be shown in cash.

b) Notice of delivery or exchange of shares, obligations and other securities. 

c) Notice for the payment of dividends or distributions, as appropriate, which must specify the amount and proportions of these or, where appropriate, the payment of interest.

 d) Any other notice addressed to shareholders, bondholders, holders of other securities or the investing public.

Keep learning from PR1ME Capital

We have already discussed  how the Mexican financial system works , in addition to telling you everything you  need to know about listing . In addition to telling you   what the origins of the bag are .

We talked about that listing on the stock market can be in many ways, and we share with you  some tools to achieve it . In addition to showing that your company can also be successful like Google, Amazon or Facebook.

Continue reading our series on financial exchanges so you can learn from  PR1ME Capital and follow us in our social media to keep posted. 

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Capítulo 6: If these companies became successful with the Stock Exchange, why wouldn´t yours?

By: Ximena Peinado  

You probably read the title and thought: “because others earn more than mine?”. But, guess what? This is not an obstacle or an excuse at all. Companies like Amazon or Facebook achieved their success by selling their shares on the stock market .

We know that the case of Google and the other two companies mentioned could be considered an exception for the innovations they offered to the market. However, this is not a matter of luck

The stock market in Mexico

The case of José Cuervo is the most accurate. In February 2017, the largest tequila producer in the world raised more than 18 billion pesos in one week by placing its shares on the Mexican Stock Exchange.

The company initially placed 548.1 million shares, of which 172 thousand 126 million were acquired by Mexicans and the rest, 375 thousand 979 million by foreigners.

Their success was a consequence of the over demand in their stocks. The guidance they received from two of the most known brokerage houses: Morgan Stanley and JP Morgan.

Eduardo Garza

A company that started with a small bakery in Mexico City called El Molino in the center of Mexico City. Bimbo was founded officially in 1945 in the capital of Mexico; the next year the company expanded to Puebla; in the 50s they opened their factory in Guadalajara and Monterrey.

The next big step Bimbo made was when in 1980 they made their company go public and sold their stocks. At first, they sold 15% of their company. Its value then multiplied and its international expansion started in the US in 1998. Then came Brazil in 2001 and Spain and Portugal in 2011. 

Palacio de Hierro was  one of the pioneers in the Mexican Stock Exchange, to which it was registered in 1990. This company, which belongs to  to Alberto Baillère, nowadays amounts to more than 18 billion dollars.

As a last example, we have BeGrand, a company focused on the transformation of the urban contour and whose main objective is to develop comfortable, quality coexistence spaces in harmony with the environment.

BeGrand is a company that has used the different instruments of the Mexican Stock Exchange in its favor. In February 2018, the company obtained a loan for 1.5 billion pesos over 3 years, with which it could pay previously acquired credits. In the same year, in the month of August, they returned to the market with a Certificate of Development Capital (CKD) with which they obtained four billion pesos to continue their projects.

Entrepreneurs and investors

In addition to this, not only do the companies themselves benefit from this, and the opportunity for profit does not end with just selling shares. An entrepreneur or an investor can also increase the value of his person both physically and morally through the purchase of shares. Men who serve as a clear example are Carlos Slim, Roberto Hernández and Alfredo Harp.

Carlos Slim began investing in the stock market in 1982 and in 1984 he created the Inbursa brokerage house and became one of the largest investors in the BMV. Slim, who belongs to one of the richest men in the world, decided to invest in times of crisis in stocks.

Today, his companies concentrate about 40 percent of the BMV’s main index and his personal wealth, according to Bloomber, is up to $ 68 billion.

Roberto Hernández and his partner, Alfredo Harp, also took advantage of the stock market boom. In 1971 the two founded Actions and Values ​​(Accival by its acronym in Spanish). Through this institution, they led many Mexican companies to list on the stock market.

One of them was Grupo México, the conglomerate of mining and transport companies whose owner is Germán Larrea, another investor benefited by the stock market boom and privatizations. Roberto Hernández and Alfredo Harp, in addition to maintaining a relevant position in Citigroup, the global corporate from Banamex, have shares in many BMV companies, in addition to being part of a large part of some of the boards of directors of these.

Stock Market Instruments

As it has already been proven, the instruments of the Mexican Stock Exchange can potentiate both the growth of your company and your own income as an investor. These previous examples are only a few of the many that exist in our country, and globally speaking, they are only a small fraction of the total number of success stories that exist.

It is important to note that this process is not easy and must be done carefully, especially in legal matters. Therefore, in the next chapter we will detail the necessary legal framework that a company on the stock market needs.

Keep learning from PR1ME Capital

We have already talked about  how the Mexican financial system works , in addition to telling you everything you  need to know about listing . In addition to telling you   what the origins of the bag are .

We talked about that listing on the stock market can be in many ways, and we share with you some tools to achieve it .

Continue reading our new series on financial exchanges so you can learn from  PR1ME Capital .

Source: El Financiero, Expansión, Dinero en Imagen, Bolsa Mexicana de Valores

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Chapter 5: How could you finance your company with the Mexican Stock Exchange?

Destacada del Capítulo 5 ¿Cuáles son los instrumentos que tienes para financiarte con la bolsa. PR1ME Capital Luis Doporto Alejandre | ¿How could you finance your company with the Mexican Stock Exchange?

By: Ximena Peinado

In the last chapter, we talked about the necessary steps that must be taken to be able to list your company on the stock market. Once you have met all the requirements, it is time for you to think about what kind of instruments available are adapted to the finance needs of your company.

Next, we present the four instruments of the Mexican Stock Market that you can use. Any of these is effective, the only thing that changes is the objective of where the money that you collect with your shares or, better said, your public offering that you will put on the stock market.

Short Term Debt

They are useful to cover the needs of working capital.

Short Term Debt, Eduardo Garza

Long Term Debt

The Long-Term Debt is designed to cover the financing needs for infrastructure, expansion, refinancing of liabilities and other corporate purposes. For this, it is necessary to carry out a securitization of assets, which, through a trust, allocate assets or flows of future cash to obtain financing to give liquidity to non liquid assets.

Long Term Debt, Eduardo Garza

Shares

Capital finance through the issuance and public offering of shares is the most competitive formula for obtaining long-term resources for the company. When the company wants to gather resources without increasing its liabilities and obtain fresh capital, the best alternative for it is the issuance of shares, which will increase its Social Capital based on its growth and expansion strategies. The return for the investor in this case is presented in two ways: in the dividends generated by the company and the capital gain.

Shares, Eduardo Garza

Real Estate Investment Trusts

REIT are vehicles destined to the finance for the acquisition or construction of real estate that has as its purpose the lease or the acquisition of the right to receive the income from the lease of said goods. By law, the Trusts distribute 95% of the profits from the rents among the investors holding the Real Estate Investment Trusts.

Real Estate Investment Trusts, Eduardo Garza

Development Capital Market

The “CKD’es” are securities that will issue trusts, which will support the channeling of investment resources to growing sectors and activities and will provide flexibility and new alternatives for portfolio diversification to Institutional and Qualified Investors in our country.

They are defined as titles or fiduciary securities destined for the finance of one or more projects, or for the acquisition of one or more companies. Their performance is tied to the underlying assets or assets in trust. These are designed to drive infrastructure, real estate, private equity and technology development projects.

Development Capital Market, Eduardo Garza

The process is long, but it has its advantages. Throughout history, there have been several success stories in companies that multiplied their value by listing. One of the biggest examples is s Apple, Microsoft, Yahoo, Amazon y Google. In the case of the Mexican Stock Exchange, one of its success stories is José Cuervo.

Keep learning from PR1ME Capital

We have already discussed  how the Mexican financial system works , in addition to telling you everything you  need to know about listing . In addition to telling you   what the origins of the bag are .

Listing on the stock exchange can be in many ways, and for this reason in the next chapter we will explain them to you so  that you as an entrepreneur determine what is best for your company .

In the next chapter, we will investigate the legal framework of the stock market, so that you master your rights and your obligations as an investor.

Continue reading our new series on financial exchanges so you can learn from PR1ME Capital .

Sources: Mexican Stock Exchange ,
London Stock Exchange , Expansión

89


Chapter 4: How to list your company on the stock market?

cómo listar tu empresa en la bolsa de valores - Doporto PR1ME Capital - Luis Doporto Alejandre

By: Ximena Peinado

The steps and requirements you need to make your company public

The main stock exchanges in the world fully recommend listing a company on the stock exchange. Today we have several instruments to do it and it is worth it, since by making your company public you can increase its value, strengthen its financial structure, grant it financial recognition and quality standards, make finances and sources of capitalization more flexible, and in general, vastly improve your company’s image.

By listing a company on the stock exchange, it becomes more attractive both nationally and internationally, since its management would be institutional and thus the enterprise has the obligation to provide the information to the investing public in a completely transparent manner.

With the improvement of the financial structure come positive consequences such as the optimization of costs, the increase in profit margins, immediate liquidity, growth, the consolidation of liabilities, the possibility for research and development, sustainability and development of human capital.

In the same way, according to the Mexican Stock Exchange, the original shareholders can diversify their investment and with it their risk, increase their liquidity and obtain the flexibility to make decisions about their assets.

The New York Stock Exchange, one of the most weighty exchanges, agrees with the benefits and encourages entrepreneurs to do so with the promise of maintaining a market model that mitigates execution risk and reduces price volatility by more than 30%.

Similarly, the London Stock Exchange has talked about the benefits of a company going public; Among the main ones, the broadening of the company’s shareholder base, the establishment of objective market value and the use of quoted shares as the acquisition currency stand out.

The process is complicated, but by following a series of specific steps, you can achieve it if your company is large enough. In the case of the Mexican Stock Exchange, the steps are the following:

First: does your company have these characteristics?

Among the requirements of the Mexican stock exchanges are: the availability of a history of operations for the last three years, the stockholders’ equity has to be above 20 million udis, the average profit in the last 3 years has to be positive, that the Securities subject to Public Offering represent 15% of the capital and  at least 10 million titles for the IPO and 200 shareholders.

It is necessary to take into account that if you want to maintain control of your company, the offer may not exceed 49% of the capital. In the case of Reit’s it is different, because they can surpass that amount without the technical committee losing its control. 

For a company to go public, it needs multidisciplinary teams to help it along the way, such as investment banking, which structures the company in the formal process of executing the IPO.

Large transnational companies that started in a university dormitory or at home (like Facebook and Apple) were encouraged by banks to access investor capital and grow in the market.

Preparation consists of having a series of documents ready that will be mentioned later. Among them are the financial statements, which type of shares are going to be included and the numbers with which that action will go to market.

Also, it is recommended that you master what makes your company unique to others: clarify the strategies used within it, its competitive advantages, its mission, its vision and its areas of opportunity.

Prepare your company in Corporate Governance:

It is necessary to implement a mechanism that regulates the relations between the shareholders, the directors and the administration of the company. This requires expert advice. If you do not have a Corporate Governance specialist in your company, contact the Mexican Stock Exchange. When implementing Corporate Governance, your company must have:

  • Legal Constitution of the Board of Directors.
  • Formality in its administrative and operational processes.
  • At least have an Independent Council.
  • Have a Support Committee (Audit and Corporate Practices).
Gobierno-corporativo-Cómo-listar-tu-empresa-en-la-bolsa-Doporto-PR1ME-Capital-Luis-Doporto-Alejandre-market-list-stock-exchange

Have a Placement Intermediary

A placement agent is the brokerage firm that signs the placement agreement with the issuer and is responsible for reviewing and analyzing the documentation and information related to the issuer’s business and activities, so that a value is registered and, when needed, the approval of their public offer, as well as carrying out the operations of placing these securities on the market.

Preferably, choose a brokerage firm that suits your company’s goals. In the Public Offering, the price is determined jointly by the issuer and the placement intermediary (brokerage house) based on market conditions and the company’s potential. In the secondary market, the price is determined by free supply and demand.

The price of the Stock Certificates, the total amount of their issue, the denomination, the nominal value, the term, the date of issue, registration and settlement, the due date, the applicable interest rate and the way to calculate it (if applicable), the periodicity of interest payments, among other characteristics, will also be determined by the Issuer and the Placement Intermediary.

Choose a Stock Rating Agency

A Stock Rating Agency measures the probability that an entity will meet its financial obligations. Issue ratings also measure the probability that the issuer will not pay the value of the issues at maturity and meet the scheduled interest payments.

Therefore, the ratings that these agencies use are one way to measure risk. Some elements included in the rating of companies include business risk (such as management performance or size criteria), financial risk (profitability, cash flow, financial flexibility) and global perspective (political risk, classification cycles, macroeconomic conditions).

Submit a Registration Request

The documentation on the application for registration and authorization of public offering are found in the “Application Formats” of the Mexican Stock Exchange.

Promotion and Sale of Securities

You must present your company to the key investor public, including the placement’s sales force and potential investors. The underwriter must distribute its securities and provide price stabilization, actively support buying and selling, and taking care of sponsorship resources, such as investor conferences and promotional presentations for non-negotiation purposes.

Maintenance of the Emission

Companies that wish to register their securities on the BMV list, must consider the following aspects for the maintenance of their issue: comply with the basic requirements and standards set forth in the current regulations of the CNBV and the Mexican Stock Exchange according to the type of instrument they wish to list.

Marketing stage

Then, the action enters a marketing stage, where it is formally sold.

Traded stock

The final stage is traded the stock, a demand book is built, a price is reached and the placement is closed.

Do not forget that there are certain aspects that must be taken care of so that the issue remains in the bag. According to the guidelines of the Mexican Stock Exchange, a company must have at least 100 shareholders, 12% of the Paid Share Capital among investors, have an analysis coverage and a market maker.

As we can see, the listing process is very detailed because only companies that have a good organization and visualization of the objectives are allowed to enter. Not only will the process help you to have a clear vision of the trajectory of your company, but it will also give you the possibility of multiplying the value of your company.

Keep learning from PR1ME Capital

We have already discussed how the Mexican financial system works , in addition to telling you everything you need to know about listing . Do not miss our next installment and keep learning with PR1ME Capital.

We also already told you what the origins of the bag are. Listing on the stock exchange can be in many ways, and for this reason in the next chapter we will explain them to you so that you as an entrepreneur determine what is best for your company. Keep reading to us at PR1ME Capital and stay tuned for the next chapter.

 Source: Bolsa Mexicana de Valores, Alto Nivel

117


Chapter 3: The Birth of Stock Exchanges

Capítulo 3 El orígen de las Bolsas de Valores Doporto PR1ME Capital

By: Ximena Peinado

The commercial markets during the Renaissance, The British East India Company and the Van der Buërse family

Now that you know all the components of a financial market, we will return to the main topic of the series: The Stock Market. We know what they are and how they work, but have you ever wondered how they originated? How is it that they exist? Who started this concept?

To understand it, we need to place ourselves in the 15th century, where the first merchant associations took place: the commercial markets

The markets were a meeting place for merchants who wanted to buy or sell goods. These merchants, during the renaissance, were commonly gathered in churches or public buildings. In the XV century, Valencia was consolidated as one of the main commercial squares in the entire Mediterranean; In those days, the main and most valuable product was silk.

The Silk Route

The next step was taken in the 16th century, during the rise of European imperialism in East and Southeast Asia, where Europe sought wealth in the East Indies, which offered spices, cloth, and luxury goods coveted by the European upper class. It was at the beginning of this century that Spain and Portugal, thanks to their maritime knowledge, monopolized trade in the Far East, leaving Britain behind. However, the British took (basically, kidnapped) the ships from Spain in 1588 and thus began to become a naval power.

Mapa de la Ruta de Seda

La Ruta de Seda. Blogs.ua

In 1600, a group of English businessmen asked Queen Elizabeth the first for an exclusive permit allowing them to travel to the East Indies on behalf of the crown in exchange for having a monopoly on the trade for 15 years. These merchants were able to finance the project by investing  70 thousand pounds from their own pocket, and this is how the East India Company was born.

Emperador Jahangir, Fuente: wikipedia

Emperador Jahangir,  Wikipedia

This company was based on a system of “factories”, which consisted of leaving representatives called “factors” to establish commercial positions and acquire and negotiate the goods. The first factory was established in Surat, after having made a special negotiation with the Mongol emperor of the time, Jahangir.

For the first twelve years, the East India Company operated as a trading company in which each member risked their own capital; besides, membership was not restricted. Gradually, after 1612, it was transformed into a corporation. This means that it was the first company where wealthy merchants and aristocrats could buy shares in it. Its main objective was to unite English traders in Southeast Asia and mitigate trading risk by seeking different investors.

These investors could diversify their risk by investing in multiple expeditions at the same time. This worked very well for them, to the point that in 1602 Holland followed along and founded its own Dutch East India Company; and France founded it until 1664.

The creation of the East Indies companies completely changed the way business is done, and from that moment in history the transaction of stocks and bonds began,  which at that time they were written documents and sold in coffee shops. These shares paid dividends on the accumulated earnings of all the trips in which they were invested. To promote the available stocks or bonds, people generally posted them on store doors or in newsletters.

The great role of a small city: Bruges

Now, we’ll have to go back a little bit. Bruges, during the 14th century, was the crossroads of two great commercial empires: the Mediterranean area (Italians) and the Baltic Sea area (German merchants), so in that city there were many shelters for all the merchants who passed through it. One of the most important host families was the Van Der Buërse family.

El escudo de la familia Van Der Buërse. Fuente: nbbmuseum.be

Coat of Arms of the Van Der Buërse Family, Nbmuseum.be

The word “stock” comes from the “Ter Buerse Inn” lodging that this family maintained, since 1285. It was called stock (or the “bag”) because of the family’s coat of arms, which displayed three leather bags (the wallets of the time).

This establishment was in front of the square that became the main commercial centre of the city. For this reason, during the 13th century, this building was the meeting point for businessmen, and the citizens themselves began to name the economic activity that took place within that house as “Bürse”. Thus, this word flourished to designate the centres of securities transactions. 

IMAGEN Coat of Arms of the Van Der Buërse Family

The first Stock Exchange

However, the first official Stock Exchange was created in 1602 in this same country and it was founded by the Dutch East India Company. Its main objectives were to raise money for travel, to carry out operations with bonds and shares to increase investors, and to collect information on the shares for sale, the results of the vessels and the investors. 

In the following years, the London Stock Exchange (1750), the New York Stock Exchange (1792), the Paris Stock Exchange (1794), the Madrid Stock Exchange (1831) and the Tokyo Stock Exchange (1878) were founded.

La Bolsa de Valores (stock exchange) de Nueva york. Fuente: CaixaBank

New York Stock Exchange, CaixaBank

The Mexican Stock Exchange

The Mexican Stock Exchange was created in 1850. At that time the shares that were sold were mainly from mining companies. This changed until 1867 when the Regulatory Law on securities brokerage was enacted. It was in this way that the businessmen began to meet in Plateros street (what is now Madero) to carry out the sale of all kinds of securities and goods.

On that same street, the stock exchange operations centre, Bolsa de México S.A., was founded in 1895. Sometime after, they were forced to cancel their operations due to political instability and the economic crisis, but in 1908 it resumed its operations in Callejón Cinco de Mayo.

One of the most significant moments for the Mexican stock market was in 1933 when the Stock Market Regulatory Law was promulgated and the Mexican Stock Exchange, S.A. was established, under the supervision of what is now the National Banking and Securities Commission of Mexico.

In 1975 the stock exchange changed its name to the Mexican Stock Exchange with the entry into force of the Stock Market Law, incorporating the stock exchanges that operated in Guadalajara and Monterrey.

Keep learning from PR1ME Capital

We have already talked about how the Mexican financial system and all its parts work, in addition to telling you everything you need to know about stock exchange. Do not miss our next article and keep learning with Pr1me Capital.

Sources: Fuente: National Geographic, Bancomer, Muy Interesante,
CaixaBank, Gedesco, ADFVN

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Everything you need to know stock Exchange

Todo lo que necesitas saber sobre listar en la bolsa

We all have heard success stories of companies that multiplied their worth by going public on the Stock Exchange. Apple. Microsoft, Yahoo, Amazon; and Jose Cuervo, Volaris and Be Grand in the Mexican scenario. What did these companies do right?, What was their path towards success? and most importantly, how can your company get the same positive results?

Chapter 1: Introduction

In this series, we will explain the process that it takes for a company to list on the Stock Exchange, its advantages, its legal framework and other related topics so you can learn all about the Stock Exchange and its procedures in an uncomplicated manner. 

But before we start, ¿do you know all of the keywords concerning the Stock Exchange? Here, we review some of the most crucial terms.

First of all: what is the Stock Exchange?

It is a facility in which companies can sell percentages of their capital, that means, they sell small parts of the company, which are called shares of stock. The price of these shares is determined by supply and demand. The companies that wish to list on the stock exchange must be public. This does not mean they become part of the government, but that the company can get its financing through an investing public. Any person can be part of this public, and these people are called shareholders or investors. Shareholders are the ones that buy small parts of the company, thus, the more parts they own the bigger the percentage they “own” of the company, as a matter of saying.

The Stock Exchange satisfies 3 interests:

  1. For the company: because by placing its shares on the market and being acquired by the shareholder public, it obtains from it the necessary financing to meet its objectives and generate wealth.
  2. For the shareholders: because they become investors and can obtain benefits (although they may also not obtain them since all investment is a risk) thanks to the interests generated by their shares.
  3. For the Estate: with some financial instruments in the Stock Exchange, like public bonds (we will mention them later on), it has the means to finance itself and to face public spending, as well as to carry out constructions and social programs,

Shareholders buy the shares on the Stock Exchange hoping that at a certain time the value of the purchased stock will increase, and then, they can sell it at a higher price than what they originally bought it. The game is to buy low and sell high.

These shareholders initially consult a brokerage house with a sum of money so that the stockbrokers that work in it can make a portfolio with the available shares of different companies to which the money will be destined. This portfolio will be divided into companies with low, medium and high risk. The shareholder will decide the type of risk depending on the profit or utility that he wants. The greater the risk, the greater the probability of profit or loss. It is like a casino, except in this case you can try to forecast the price fluctuation.

In addition to the stock market (also called capital market), the Stock Market offers other types of options, such as the currency market, the bond market, the derivatives and the commodity market.

The currency market

Better known as the Foreign Exchange (FX) is according to BBVA (a Mexican financial institution) the biggest financial market in the world and it is also the base of all of the other financial markets. Its main objective is to facilitate international commerce. In this physical or virtual space, the price of each currency is called the exchange rate. This market makes it possible to buy and sell from companies from different countries that don´t have the same currency as yours. In the foreign exchange market, the purchase price is always lower than the sale price, the difference is the benefit of the intermediary that covers the costs of hedging and managing foreign exchange risk.

The bond market

Its main objective is to unite the group of money suppliers and demanders. It meets the savings and investment needs of projects and capital by companies and governments. Both public and private bonds are included in this market. In Mexico, public debt bonds are called CETES and they work to finance the government in social programs, construction, or other needs.

  • Advantages of CETES: It allows the investor to schedule their cash (or liquidity) needs, they are low risk, they can be sold on the secondary market before maturity and their yield serves as the base interest rate for other financial operations.
  • Disadvantages of CETES: if sold before expiration, you may receive a different return than initially expected. The longer you leave the money in the hands of the government, the greater its price may fluctuate. The CETES interest rate is set by Banco de México.

Other mechanisms guaranteed by the government in this type of market may be Condes 91 LT (Development Bonds with Revisable Interest Rate), M Bonds (Development Bonds with long-term fixed interest rate), BPA’s (Bonds for the Protection of Bank Savings), BREMS (Bank of Mexico Monetary Regulation Bonds), UDIBONOS (Federal Government Development Bonds UDI’s) and UMS (Mexican Sovereign Bonds).

The derivatives market

They are contracts that depend on the value of other (underlying) assets that depend on the value of other assets (such as oil) that can eliminate volatility and uncertainty in the future, therefore they serve to cover risks and manage more effectively the resources of the companies. That is, it is a kind of “insurance” in the case in which the company is protected from (negative) changes in the price of an asset, or commodity.

The raw materials market

Raw materials are the underlying assets that were discussed in the previous point. These include:

  • Energy: Oil, gas, natural gas and coal.
  • Grains: corn, wheat, rice, oats, etc.
  • Metals: gold, silver, copper, aluminium.

Now,

¿What is a financial crisis and when does it happen?

As previously stated, if there is no risk, there is no profit. And sometimes that risk ends in a crisis. A financial crisis is a situation where the economic value of institutions or financial assets falls rapidly, in such a way that it is associated with panic, the massive sale of assets, and / or the massive withdrawal of money from savings and investment accounts.

There are four concepts associated with a crisis:

  1. Speculation: bet for profit
    Speculation is the set of commercial or financial operations that aim to obtain an economic benefit by taking advantage of price fluctuations over time by investing capital, that is, buying low and selling high.
  2. Bubble: “artificial” price growth.
    It is a phenomenon that occurs in the markets when there is an abnormal, uncontrolled and prolonged rise in the prices of an asset, in such a way that it moves further and further away from the real value. Investors buy in order to sell a higher price in the future, causing a continuous upward spiral.
  3. Stock Crash: abrupt drop in prices (a bubble breaks)
    The price of the asset reaches absurdly high levels until the bubble ends bursting, due to the start of the massive sale of the asset when there are few buyers willing to buy them. This causes a sudden and abrupt drop in prices, taking it to very low prices and even below its initial level, leaving behind many debts.
  4. Stock Market Boom: massive investment in financial instruments.
    It is when there is a significant increase in the world’s best-known stock indices. It is when most investors withdraw their money and decide to put it in a specific company.

Now, you know the most basic concepts to be able to understand and embark on the path to your company’s stock listing. In the following chapters, related topics such as the Mexican Stock Exchange, the Stock Market Legal Framework, the listing process, the international stock market and many others will be discussed.

Keep learning with Pr1me Capital.

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