Tag Archives: stock exchange

Chapter 10: What We Have Learned about Stock Exchange

Capítulo 10 Lo que aprendimos sobre la Bolsa de Valores stock exchange

By: Ximena Peinado

Last chapter

Only Good things can happen when your company goes public: its value increases, its financial structure is strengthened, it gets financial recognition and quality standards.

In addition, it makes its finances more flexible, improves its image, becomes more attractive to national and international markets, the costs are optimized and the utility margins are increased, among many other benefits.

The list could go on, but the most important thing is that we have caught your attention, and that’s a very good thing for your company’s future. Nonetheless, it is better if we start from the beginning. 

The Stock Exchanges, the centre in which companies can share their stocks, satisfies three interests in society due its many investment possibilities:

  • State
  • Savers
  • The companies.

In addition to stocks, the Stock Exchanges currencies, debt, derivatives and the commodity market.

Additional to stocks, the Stock Exchanges and Value Market also offer foreign exchange, debt, derivatives and the commodities market.

Origins of the Stock Market

The idea of the stock exchange originated in the Van Der Buërse family’s lodging in Bruges, Belgium during the 14th century.

This establishment was in front of the square that became the main commercial center of the city. For this reason, during the 13th century this building was the venue for many business meetings, and the same citizens began to call the economic activity that took place inside that house as “Bürse”.

It was thus that this word flourished in other places to designate the centers of securities transactions. However, officially, the first stock exchange was created in 1602 in the same country by the Dutch East India Company.

Fue así que esta palabra prosperó en otros lugares para designar a los centros de transacciones de valores. Sin embargo, oficialmente, la primera bolsa de valores se creó en 1602 en el mismo país por la Compañía Holandesa de las Indias Orientales.

The key topics you need to remember about the Value and Stock Exchange Markets

In the world there are 60 bags that stand out the most. These vary in their size, trading volume and market capitalization.

For all countries alike, the stock market is beneficial and, fortunately, investment methods have never been as accessible as now.

Accessibility has meant that nations have a strong investment mechanism to obtain national and international resources.

And, over time, this action creates jobs and with them, the development of these companies. Compared with the rest of the countries, in Mexico the market is small.

According to INEGI, in Mexico there are 5 million 53 thousand 130 businesses and companies . Of which only 146 are listed on the stock market or participate in it with debt or shares. Of the most recognized and important bags are; The New York Stock Exchange, the London Stock Exchange, Hong Kong, Toronto, Frankfurt, Nasdaq and Euronext.

These centres only comprise a fraction of the financial system in Mexico, the two most important exchanges in the country being the BIVA and the Mexican Stock Exchange.

Both the rest of the Mexican financial system, as well as the stock markets, are governed by authorities such as the Ministry of Finance and Public Credit, the National Banking and Securities Commission, the National Insurance and Surety Commission, among others.

In the same way, there are three associations that also make up the Mexican financial landscape : SIF-ICAP, the Mexican Association of Stock Market Institutions (AMIB) and the Association of Banks of Mexico.

Requirements to list your company

Among the requirements, they must be found in the history of operations of the last three years:

  • Stockholders’ equity above 20 million udis
  • A positive average profit in the last 3 years.
  • Shares to be sold representing 15% of the capital
  • Have at least 10 million titles for the IPO
  • 200 shareholders.

Once having the essential characteristics, the next step is to prepare the company in Corporate Governance to regulate the relations between shareholders and the company.

It is also necessary to have the support of a brokerage firm that signs the placement agreement with the issuer and analyzes the documentation and information related to the business.

At the same time is the rating given to your company for being able to meet its financial obligations; These are carried out by the Securities Rating Agencies.

Having all of the above, the next step is to submit an application for registration issued by the National Banking and Securities Commission.

The securities are then promoted and sold to the key investing public, so that they can begin to be sold formally in the marketing stage.

In the final stage, the stock is marketed and a demand book is built : the final price is reached and placed on the stock market.

Be an expert in the Mexican Stock Exchange

The Mexican Stock Exchange has five different effective instruments that vary depending on where the money that is collected with the shares will go, or the public offering that will be placed on the stock market. These are: short-term debt, long-term debt, stocks, Fibras, and the Development Capital Market.

It is important that both shareholders and companies know their rights and obligations in the stock market. These are provided for in the Securities Market Law, composed of 413 articles that encompass all issues relevant to the stock market.

In addition to this series of guidelines, the National Securities Banking Commission has general provisions for issuers of securities and other participants in the securities market.

Although we know of failed cases like Pets.com, Readers Digest, Dell and Jc Penney; We came to the conclusion that the failure of these companies was due to poor planning, impulsive actions and the sale of false expectations about your company.

Contrary to these failures, the success stories stand out , of which your company could be the next. You have to follow the steps of those who came to the right path and learn from the experience of José Cuervo, Palacio de Hierro, Google or Amazon, which were able to expand and grow through a correct management of their actions.

In this series you have learned everything about bags: from their origin, to their handling and current situation in the world.

Now you have all the necessary knowledge to dominate the stock market and thus be able to take advantage of the great benefits that await you if you know how to apply everything you have learned with us at PR1ME Capital.

Stay tuned for our page, as we will be putting out more interesting and educational financial series for you.

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Chapter 8: These companies failed on the Stock Exchange: why?

Capítulo 8 Por qué estas Empresas que fracasaron en la bolsa - Luis Doproto Alejandre CEO de PR1ME Capital México companies

The events and mistakes that gave these public companies more trouble than benefit

As explained in the previous chapters, listing a company on the stock exchange is a process that not only needs to be closely observed in the registration, but also in its trajectory and closure. The brokerage houses and brokers they make are professionals and probably have years of experience and study. A person who lacks knowledge of threats can mishandle a company in the marketplace, as as has always been said, an IPO always comes with a risk.

However, the history of other companies helps us today to understand what they did wrong and thus avoid their mistakes at all costs. In this chapter, we will tell you about some of the most famous cases.

Get to know your investors and be realistic with the amount of money you want to get from them:

 Pets.com

This pet food and accessories company had a business model that was not sustainable, although they were a company recognized in the United States for their commercials and their participation in the Thanksgiving parade of wholesaler Macy’s in New York.

In February 2000, the company was listed on the Stock Exchange. Its shares were initially priced at one dollar and had a brief rise to $ 14 dollars, however, shortly after they continued to fall to even less than one dollar. The company never managed to get the necessary cash from its investors. In November 2000, after nine months of listing, pets.com closed and laid off about 300 employees.

Always think of your customers and your competition:

Disney and GO.COM 

Disney, in alliance with its online properties ABC.com and Espn.com, created GO.com in ’98 to compete with Yahoo and AOL. It went  public but it could never be really launched, since Disney did not take into account that it would never have a greater user base than Yahoo or AOL. Users preferred the other two search engines not only because they already knew the, but also because Go.com, being a Disney company, restricted content for adults.

In January 2001, Disney announced that it would shut down Go.com, and the company recorded a total loss of $ 790 million. Disney never actually closed the site, which now only functions as a hosting site for ESPN.com and ABC.com.

Do not act impulsively:

Readers Digest

We all know the Readers Digest magazine, but what you surely did not know is that in addition to being a global magazine, the corporate also manages 60 different websites. In 2007, the company was acquired by Ripplewood Holdings, and it was privatized. Since then, the company had its strongest decline. The company already had financial limitations since it was listed, but when it became private its problems worsened. Since then, RD declared bankruptcy twice: in 2009 and 2013. In February 2014, Mike Luckell bought the company for one euro.

If your company is not ready, neither are you:

DELL 

Privatization has its benefits, but it can also increase pressure from the new private owners, as it was in the case of DELL. Most agreements for public companies to be private are through investment conglomerates, which can set strict business objectives with tight deadlines for company management. It can also be a red flag for employees in mergers or acquisitions.

Dell was one of the technology pioneers with computers, tablets, cell phones, and other hardware accessories. In 2013, Michael Dell, the owner, sold the company in 2013 for $ 24.4 billion. Before that, its shares were listed on Nasdaq and on the Hong Kong Stock Exchange. After five years of being private, in 2018 it was listed again since it admitted that they first had to fix their internal problems so that these were not worsened by the stock market.

The company fell sharply in 2013 due to strong competition from Apple, Amazon and Microsoft.

In the face of adversity, never give up:

JC Penney y Sears

JC Penney Company Inc, the US department store chain, still stands despite having seen sharp declines since 2006 in its shares, which are down 96% since April 2007, its best time.

The fall of this company is mainly due to popular online trading platforms like Amazon. However, JCPenney has taken actions to counter the loss, such as its omnichannel presence, its business in women’s clothing, and is increasingly immersing itself in its private brands. They have been trying to get out of the danger zone, unlike a similar company that is now in financial trouble as well: Sears.

Sears was not only affected by the new competition, but also by its lack of adaptation to the market and the tastes of its customers.

Don´t give false expectations about your company: Gilead 

A more recent case: The pharmaceutical company Gilead had promised to be the solution in the fight against the coronavirus in already infected patients. Its actions rose in the market when the news broke out, however in April 2020 data was leaked about a clinical trial in China that indicated that the drug was not effective in what it promised. It fell 7 per cent, although today it has recovered its fall to 4 per cent.

Now, you already know some of the biggest mistakes that have been made in the stock market. Additionally, it is recommended that you check the movement of the listed stocks daily, noting which ones have fallen the most and consulting information on the company (which must be public by definition) so that you can understand the reason why some go up. while others go down.

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 . We also show you that your company can also be successful like Google, Amazon or Facebook.

And we teach a little about the rights and obligations as an investor or issuer in the Stock Market

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

Sources: CNN, New York Times, Investopedia.com,
Investorplace.com, Elpaís.com

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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?

Destacada con los logos de FAcebook, Palacio de Hierro, PR1ME Capital, José Cuervo

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 2: The Mexican Financial System and its Components

Portada de la entrada PR1ME Capital con logos de la Bosla Mexicana de valroes, BIVA, Banco de México, AMIB entre otros

The Mexican Stock Exchange and the brokerage houses are just a part of the whole Mexican Financial System. They are the most known, and the ones that you should master so that you can make your company go public. But knowing the whole panorama is always an additional help to be informed of your rights as an investor and the tools that you can use to your advantage. 

The Mexican financial system

The Mexican financial system is supervised by seven authorities:

  1. The Bank of Mexico
  2. The National Commission of the Retirement Savings System (Consar by its acronym in Spanish)
  3. The Ministry of Finance and Public Credit (SHCP)
  4. The National Banking and Securities Commission (CNBV)
  5. The Institute for the Protection of Bank Savings (IPAB)
  6. The National Commission of Insurance and Bonds (CNSF)
  7. The National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF)

  • The Banco de México is the one who regulates monetary policy and preserves the value of the currency; It is also the issuer of paper money and the financial agent of the Federal Government. It is also in charge of ensuring that the payment systems work correctly.
  • CONDUSEF is a specialized public institution that promotes financial education and transparency so that users make informed decisions about the benefits, costs, and risks of the products offered in the Mexican Financial System. It promotes advice and support in customer claims and monitors transparency in the rest of the financial services.
  • The CNBV is a decentralized body of the Ministry of Finance and Public Credit with authority or matters of authorization, regulation, supervision and sanction on the various sectors and entities that make up the financial system in Mexico. 
  • CONSAR defines pension policies. It is made up of individual accounts in the name of the workers who manage the AFORE.
  • CNSF is a decentralized body of the Ministry of Finance and Public Credit in charge of supervising that the operation of the insurance and surety sectors adheres to the regulatory framework.
  • IPAB is a government institution that is in charge of administering Bank Deposit Insurance for the benefit and protection of savers.

The financial system, in addition to authorities, also has intermediaries. These are banks, brokerage houses, insurance and investment companies, landlords, factoring companies, and exchange houses.

The Mexican Stock Exchanges

The Mexican Stock Exchange (BMV)

It is the second-largest stock exchange in Latin America with a total market capitalization of more than 530 billion dollars. The group of the Mexican Stock Exchange is made up of companies that together offer comprehensive services to facilitate the operation and post-negotiation of the stock market in Mexico. These companies and sub-exchanges include:

  • MexDer: Is the Mexican Derivatives Exchange. It offers instruments that allow planning, hedging and managing financial risks, as well as optimizing the performance of investment portfolios.
  • Asigna: It is a management and payment trust. It is the counterparty and guarantor of all financial obligations that derive from the operation of derivative contracts.
  • Indeval: Provides the financial system with the services of custody, administration, compensation and settlement of securities.
  • Bursatec: It is a subsidiary of Indeval and its goal is to design, implement, integrate and operate a wide variety of automated information and communication systems for the financial sector. It is merged with the Mexican Corporate Stock Market.
  • The Mexican Corporate of the Stock Market (CMMV by its acronym in Spanish) is the one who hires, manages and controls the personnel of the Mexican Stock Exchange.
  •  the Central Securities Counterparty (CCV): It is an entity that complements the clearing and settlement services of purchase and sale operations. It is responsible for the buyer obtaining the securities he acquired and the seller obtaining the corresponding cash.
  • Operational Valuation and Market References (VALMER) Is dedicated to providing daily updated prices for the valuation of financial instruments; In addition, it has comprehensive calculation, information, analysis and risk services related to these prices. It is regulated and supervised by the National Banking and Securities Commission.
  • InterGloval: It was founded in 2011 and is a company that offers global financial messaging services. InterGloval clients can access more than 9,000 banks around the world to make everything from a simple payment to more complicated operations, such as buying and selling securities and currencies.

The Institutional Stock Exchange (BIVA by its acronym in Spanish)

It started operations as  Mexico’s new stock exchange in July 2018. Its foray into the market improves the offer of services, generates new stock indices. With the existence of this new stock exchange, companies have the option of listing their debt or equity securities on one of the two existing stock exchanges, and their stocks are listed on both.

The liquidation of the securities is done through the CCV and the Indeval, mentioned above. The different brokerage houses will choose either of the two stock exchanges depending on the price, volume and probability of execution. All companies that are listed on the Mexican Stock Exchange are automatically listed on BIVA and vice versa. The same emissions cannot be listed on the two exchanges, although different emissions from the same company can be put in each of the exchanges.

Finally, you need to know these three associations that also make up the Mexican financial landscape:

  • SIF- ICAP: The Financial Integration Services (SIF in Spanish) company was created to promote equality in the negotiation of debt securities within the market. In 2000 they merged with ICAP, an English company considered to be the largest brokerage in the world in terms of capital and positioning. SIF-ICAP is the only financial brokerage company backed by the Mexican Stock Exchange. Its function is that, through a broker, it finds a person or company interested in investing. 
  • The Mexican Association of Stock Institutions (AMIB): It is a non-profit institution that focuses on strengthening stock market intermediation and the development of the stock market by certifying the technical capacity of the promoters, operators and advisers of the stock market.
  • Association of Banks of Mexico (ABM): It represents the general interests of banks. Initially, it was created with the participation of 32 banks and currently has an association with 50 multiple banking institutions in the country. Among its main services are counselling, the exchange of statistical information between participating institutions to find out trends and meet the requirements of the various authorities; Union services to deal with issues between authorities and top organizations of the private sector, and the development and coordination of training programs on various topics of interest.

Regulate the market

The knowledge of all the components of the Mexican financial system– both the government and those affiliated with the Mexican Stock Exchange– that regulate the market is essential. Each one has its specific purpose and they collaborate with their advice and experience so that there is a balance in the different sectors of the financial market.

Keep reading our series, in which we will later address topics such as the process of listing a company on the Mexican stock exchange, the instruments available to do so and its legal requirements.

Keep learning with Pr1me Capital.

Sources: Banco de México, Bolsa Mexicana de Valores, Condusef, CCV,
Valmer, BBVA, Expansión, sif-icap, AMIB, ABM, gob.mx 

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Everything you need to know stock Exchange

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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