In 2020, I reported about the little-known stock exchange of the Channel Islands.
Itself a listed company, its stock was trading at 750 pence.
Last month, an American firm made a takeover offer of 2,250 pence.
This stock combined a ridiculously low valuation with a high-potential business. Think buying a high-growth fintech company with a quasi-monopoly and single-digit multiples – and that’s before even mentioning the cash reserves. It was only a matter of time before someone was going to discover it.
Are there other hidden gems waiting to be discovered?
Famous (and less famous) islands
Even Brits are not always familiar with the special group of islands on their doorstep, often mixing up the the Channel Islands with the Isle of Man (in the Irish Sea) or the Isle of Wight (part of the United Kingdom).
The Channel Islands are located between the UK and France and consist of Jersey, Guernsey, Alderney, and Sark. Somewhat counter-intuitively, Channel Islands is a geographical term rather than the name of the jurisdiction. Guernsey/Alderney, Jersey and Sark are each a jurisdiction of their own. They govern themselves through their local parliaments – though even that is not an entirely accurate statement, and just about everything about the Channel Islands tends to be a bit too complicated to explain it in just a few words.
In any case, they are so-called Crown Dependencies. They are not part of the United Kingdom, and they have never been part of the European Union. Instead, they belong to the English Crown. What this means in real life is that there is a complex set of relationships between the Channel Islands, the Crown, and the United Kingdom.
In short, these islands are largely doing their own thing.
I wrote about them repeatedly already:
These writings mostly covered Guernsey and Sark (the island where I reside).
To keep things fresh, today’s article includes Jersey as well.
Jersey – an island transformed
Of the four main Channel Islands, Jersey is the best known, by far.
However, the most widely held belief about the island is wrong. It’s that Jersey is a “tax haven” of the kind where shady characters would hide their money using numbered accounts or shell companies.
It is true that all the Channel Islands (including Jersey) have been low-tax jurisdictions since the 13th century.
However, the origin of Jersey’s finance industry was never primarily in facilitating tax evasion. Instead, the island devised ways for investors to legitimately use it in order to avoid taxes and safeguard assets. While abuse did take place, MONEYVAL in 2024 confirmed that Jersey’s effectiveness in preventing financial crime was among the highest level across jurisdictions evaluated around the world. The Financial Times has – quite rightly – switched from calling Jersey a “tax haven” to a “low-tax offshore centre“.
The detailed history of all this is now available for the first time: “The History of Jersey as an International Finance Centre“, authored by the late Colin Powell, was published posthumously in 2023. Powell had spent over five decades developing and guiding the island’s financial industry.
His book lays out how in the 1960s, Jersey was still an island dominated by tourism (52% of the local economy) and agriculture (10%), with banking just in third spot (9%). In 1986, the finance industry overtook the tourism industry. Today, it’s finance that rules the island’s economy (37%), with tourism (5%) and agriculture (1%) being shadows of their former glory.
For better or worse, in the space of a few decades, Jersey’s island economy has been entirely transformed.
Thanks to a deeply ingrained culture of small government, Jersey has long offered low tax rates, which attracted many new, often wealthy residents. They needed financial services, and wealthy investors from abroad also started to recognise the advantages of placing their assets in a politically stable and reliable jurisdiction. The 5,000 Jersey residents employed in the island’s trust sector are currently safekeeping over GBP 1,000bn (USD 1,200bn) in private wealth for clients from the UK, Europe, the Middle East, Asia, and Africa. You could say that Jersey is a British variant of Switzerland and Liechtenstein.
One company that successfully operates in Jersey’s finance sector had already made an appearance in a January 2020 Weekly Dispatch: JTC (ISIN JE00BF4X3P53, UK:JTC). The financial services company has over GBP 400bn of assets under administration and now operates a global network of offices while remaining headquartered in Jersey. The stock has since risen from 429 pence to 880 pence, giving the company a market cap of GBP 1.5bn. JTC is a good bet for anyone looking for a proxy that allows them to buy into Jersey’s finance industry. Listed in London, its stock is easily accessible and liquid enough for private investors. Looking at the state of geopolitics and the growing demand for safekeeping assets in stable, reliable jurisdictions, it’s not difficult to imagine the stock doing well over the next five years, too.
JTC.
Small-cap aficionados might be interested in two other companies that deserve to be called Jersey native.
Jersey Oil & Gas (ISIN GB00BYN5YK77, UK:JOG) owns a minority stake in an oil field in the North Sea, called the Greater Buchan Area. Like many other British oil and gas companies, it saw its share price collapse 80% in 2023/24. It has doubled over the past months, despite the significant fall of the oil price. The company only has a market cap of GBP 37m, and the stock is extremely cheap relative to its projected cash flow – something that is spelled out in more details in the company’s investor relations material. There is speculation that some larger UK players will want to gobble up Jersey Oil & Gas to make faster use of their large tax losses.
Jersey Oil & Gas.
Jersey Electricity (ISIN JE00B43SP147, UK:JEL) is the island’s energy provider and 62% government-owned. The stock is currently trading at 11x the last reported annual earnings per share, and the ordinary stock has a dividend of over 5%. The company also has two categories of preference shares outstanding. Of the 600 shareholders that are known to be invested in the GBP 53m company, the vast majority hail from Jersey. It’s an investment for local patriots, first and foremost. It’s unlikely that the stock will ever garner much investor interest outside of Jersey.
On the sexier (or riskier) side of things are two cash shells that are based out of Jersey.
Bay Capital (ISIN JE00BKVHVW88, UK:BAY) has been looking for an acquisition target since listing as a blind pool-type shell in 2021. The company had GBP 4.7m of cash at year-end 2024, which roughly equates to its current market cap. These types of shares see a rally whenever there is speculation that a juicy acquisition target has been identified. E.g., at year-end 2024, the stock soared from 4 pence to 10 pence. Following its listing it had traded as high as 26 pence. It’s now back at 6 pence, and the company is burning through GBP 1.5m of cash every year to sustain its status as listed company. Will it take off? Shell companies do occasionally produce outstanding speculative run-ups.
Bay Capital.
Red Capital (ISIN JE00BLB56J12, UK:REDC) also listed in 2021. The company has negligible remaining cash and a market cap of just GBP 1.25m. It could find an acquisition target, or raise more cash, or capitulate and delist. Based on the low market cap and the collapsed share price, the stock market does not currently seem to have much confidence that the company will succeed with an acquisition. Then again, you never know.
Red Capital.
For an island economy with just 120,000 residents, Jersey comprises a large number of listed companies: around 40 stocks. Many of these companies only have a small rep office on the island while running their actual operation from elsewhere (such as private equity giant CVC Capital (ISIN JE00BRX98089, Euronext:CVC), which is Jersey-registered but has its operative headquarter in Luxembourg and its main listing on Euronext). Companies often choose a place like Jersey for their registration, which is perfectly legal provided they evidence a certain amount of so-called “substance”, such as holding directors meetings on the island. CVC Capital’s co-founder and former chairman Donald Mackenzie also resides on Jersey, where he probably enjoys hanging out with other entrepreneurs of his type.
Source: ITV, 17 May 2024.
Large fortunes and semi-retired billionaires are something you also find in….
Guernsey – the underdog island
Guersey is very different from Jersey. Unlike its better-known counterpart which has a large Radisson hotel by the waterfront and an airport served by EasyJet, Guernsey hardly features any international chain operations, and relies on its government-owned national airline, Aurigny. With just 62,000 residents (half the size of Jersey), Guernsey made a conscious decision to retain much of its original character.
