In the world of modern finance, equity can be both a source of strength and a potential Achilles’ heel. Investors and companies seeking growth have increasingly turned to leveraging their own shares as collateral to secure funding — from expansion capital to strategic acquisitions. But two recent high-profile developments in the Caribbean have underscored the significant risks inherent in this strategy: the aborted IPO of Dequity Capital Management Limited in Jamaica and Michael Lee-Chin’s consideration of selling his controlling stake in National Commercial Bank Financial Group Limited (NCBFG) to meet looming bond obligations.
These events illuminate the perilous tightrope that businesses walk when they pledge equity — especially in thin equity markets — and offer lessons that resonate far beyond the Caribbean.
Case One: Dequity Capital’s IPO Failure
In late 2025, Dequity Capital Management Limited, a private equity firm led by Kadeen Mairs, sought to raise J$657.5 million (approximately US$4.07 million) through an IPO on the Jamaica Stock Exchange (JSE). The capital was earmarked primarily to repay J$626 million in debt and cover listing expenses. Priced at J$1 per share, the offer required at least J$500 million to be deemed successful.
Kadeen Mairs
The result? The IPO fell well short of its minimum raise, forcing Dequity to cancel the listing and refund investors.
The failure highlights a core risk: market demand may not align with issuer expectations, especially in smaller equity markets where investor bases are limited and appetite for new issues is fragile. The firm’s plan to leverage its equity value — by monetising stock sales to fund operations and pay down debt — was undermined by insufficient investor demand. Instead of increasing capital strength, the aborted IPO became a strategic setback.
Case Two: Michael Lee-Chin and NCBFG
Jamaican-Canadian billionaire Michael Lee-Chin faces a different but related predicament. Lee-Chin’s long-standing controlling interest in NCB Financial Group Limited — a cornerstone of Caribbean banking — is now part of a strategic calculus around bond obligations totaling US$297 million, including a US$94 million payment now due.
Rather than relying on cash reserves or conventional financing, Lee-Chin has activated a 45-day remedial period beginning December 31 to work with noteholders of AIC (Barbados) Limited — a vehicle connected to his broader portfolio — to address principal and interest owed. Sources indicate he is considering selling part of his controlling NCBFG stake to satisfy this obligation.
Michael Lee-Chin
In both situations — Dequity’s aborted IPO and Lee-Chin’s possible share sale — equity that was meant to underpin growth or strategic position is being repositioned to meet financial commitments. This raises a stark question: what happens when equity used as collateral becomes the very asset needed to pay down debts?
How Using Equity as Collateral Works — and Why It Can Backfire
Using shares as collateral is a common financing strategy in global markets: a company pledges equity to secure loans, often to finance expansion, acquisitions, working capital or strategic projects. It makes sense when:
-
The underlying equity has strong liquidity and market depth
-
The borrowing entity can generate sustained cash flow to meet repayment terms
-
Asset prices remain stable or appreciate
However, in practice, collateralising equity becomes risky when market conditions deteriorate, liquidity dries up, or the equity itself declines in value — situations that Caribbean markets can be especially sensitive to given their relatively small investor base and trading volumes.
A leveraged position that looks robust on paper can quickly unravel if:
-
A downturn in share price reduces the value of the collateral
-
A forced sale is needed to meet a margin call or meet debt service
-
Market sentiment is weak — as in the Dequity IPO — reducing the ability to monetise equity at planned prices
In these cases, untenable leverage can convert promising equity into distressed assets — precisely the opposite of its original role.
International Comparisons: Lessons from Around the World
Abraaj Group (2018) — Private Equity Collapse Under Debt Pressure
The Dubai-based private equity firm that once managed billions of dollars collapsed under a tangle of debt and cash flow stress. While not a direct result of equity collateralisation, Abraaj’s crisis revealed how leverage — when combined with opaque governance and weak liquidity — can rapidly erode investor confidence and asset value. (nytimes.com)
Kingfisher Airlines (2012) — Share Pledges and Forced Sales
The Indian airline’s founder, Vijay Mallya, pledged shares to secure loans that later became unsustainable as financial performance deteriorated — ultimately leading to asset seizures and forced sales that damaged creditor recoveries and corporate viability. (livemint.com)
WeWork (2019) — Valuation Decline and Equity Leverage
WeWork’s precipitous drop in valuation post-IPO filing, combined with its leveraged balance sheet, showed how fast equity leverage can become toxic when market confidence collapses — forcing sponsor commitments and restructuring. (forbes.com)
These global examples underscore a consistent theme: equity leverage amplifies returns in stable markets, but blows back quickly when markets turn or asset prices weaken.
Impact on Jamaica and Caribbean Markets
The Dequity and Lee-Chin stories are not isolated; they reflect structural characteristics of Caribbean equity markets:
1. Smaller, Less Liquid Markets
Unlike large developed markets, Caribbean exchanges have limited depth. This means large share offerings or sales by major shareholders can exert downward pressure on prices, reducing the realisable value of pledged equity.
2. Retail Dominance and Sensitivity
Retail investors drive a significant share of trading volumes. Their participation — or lack thereof — can determine whether an IPO succeeds, as Dequity’s experience shows.
3. High Equity Valuation Volatility
Sectors tied to commodities, tourism and financial services — all key contributors to Caribbean GDP — are sensitive to macro shocks. Rising interest rates, currency volatility or global tourism downturns directly affect valuations, thereby affecting collateral value.
4. Governance and Transparency Expectations
Investors — particularly retail holders — demand clear communication and strong governance. Failed capital raises or large equity sales for debt service can erode confidence, reducing participation in future offerings and deepening risk premiums.
In this environment, leveraging equity is inherently more precarious than in larger, more liquid markets.
Lessons for Jamaican Entrepreneurs and Companies
1. Don’t Use Core Strategic Equity as Loan Collateral
If a company’s most valuable shares are used to secure loans, it creates a precarious dependency: when the value of that equity is needed most, it may not be readily monetised without adverse market impact.
2. Prioritise Cash Flow Strength Over Asset Collateral
Investors and lenders alike ought to emphasise cash flow stability and predictable earnings over asset pledges. Growing revenues and strong cost management improve creditworthiness more sustainably than pledging equity.
3. Structure Contingency Plans
When equity is pledged, companies must be prepared for adverse scenarios: what happens if the share price declines? What is the fallback repayment option? Companies should establish monitoring triggers and early-warning indicators to avoid margin calls that force rushed transactions.
4. Educate Investors on Market Dynamics
Part of Dequity’s IPO failure came from misaligned expectations about demand. Businesses must communicate clearly with potential investors about market conditions, growth prospects and risk factors — especially in nascent or illiquid markets.
5. Balance Growth and Prudence
Ambitious capital strategies require tempered expectations. Firms entering capital markets or leveraging equity should balance growth ambitions with realistic assessments of market appetite, liquidity and investor sentiment.
A Strategic Roadmap for the Caribbean
In light of these developments, Caribbean entrepreneurs can adopt several strategic safeguards:
A. Diversify Funding Sources
Relying solely on equity pledge financing is risky in small markets. Alternatives such as revenue-based financing, structured debt instruments, mezzanine capital, or private placements can provide capital without jeopardising strategic equity positions.
B. Deepen Market Participation Before Capital Moves
Companies seeking capital should first build a broad investor base, strong track records, and transparent governance practices. This increases credibility and demand, reducing the risk of IPO failure or discounted equity sales.
C. Strengthen Governance and Investor Relations
Clear reporting, robust board oversight, and active stakeholder communication build investor trust — a critical asset when launching capital-raising initiatives or negotiating financing terms.
D. Plan Equity Usage Carefully
Leverage should be calibrated with stress testing — assessing how equity value might change under various scenarios (e.g., tourism downturns, currency moves, interest rate spikes) before collateralising shares.
E. Leverage Regional Capital Pools
In addition to local markets, Caribbean firms can explore regional capital pools (e.g., Caribbean Development Bank bonds, regional institutional investors) to spread risk and reduce dependency on local equity sales.
Businessuite Conclusion: Equity as Collateral — A Double-Edged Sword
The contrasting fortunes of Dequity Capital Management and Michael Lee-Chin’s NCBFG strategy highlight a fundamental truth in corporate finance: collateralising equity is not merely an accounting exercise — it is a strategic bet. When markets are robust and liquidity abundant, the bet can pay off. But when confidence wanes, or demand fails to materialise, that same strategy can become a liability.
For Caribbean companies and investors, the task now is to internalise these lessons: build deeper markets before pledging core assets, prioritise sustainable cash flows, and communicate transparently with investors. Above all, businesses must remember that equity is not just an asset on the balance sheet — it is a lifeline for strategic autonomy and long-term growth.
