The JSE’s wholly owned subsidiary, JSE Private Placements (JPP), has obtained a financial services provider licence, paving the way for the bourse to create an avenue for companies to raise capital through the private sale of both debt and equity.
The licence will allow the JPP to connect companies directly to investors via an automated, digitised platform to create a transparent, efficient and accessible private placements market in SA. Private placements are a form of fund raising whereby companies sell securities, typically bonds or equity, directly to a select group of pre-qualified investors rather than by doing so on the open market.
“With JPP, we are building a future-fit capital market that delivers a seamless digital marketplace that pairs up private debt and equity issuers with investors, including venture capital funders,” said JSE CEO Leila Fourie. “JPP intends to simplify, automate and streamline the private capital raising process.”
The JSE applied for a licence to start a private placement market after it bought a minority stake in UK fintech company Globacap Technology for £4m just over a year ago. That transaction was seen as a way for it to digitise its private placement platform and registry services with the specific aim of bolstering capital raising for small-to-medium sized enterprises and infrastructure projects.
The JSE says its relationship with Globacap enables “frictionless asset creation and transferability” as the UK company’s platform already hosts more than $10bn of private share and debt instruments on behalf of over 80 companies and 4,300 investors.
“We are excited to work with the JSE on these leading-edge projects and believe these advances will have a significant impact on SA’s economic growth, while positioning JPP as a market leader in digital private placements,” said Myles Milston, Globacap’s CEO.
The JSE’s creation of a private placement platform comes at a time when the bourse is suffering from a continued delisting of companies, many of which complain about the cost burden of being listed as well as onerous oversight and regulation. At the same time, weak economic growth and the impact of Covid-19 and subsequent lockdowns have left many companies in desperate need of funding.
Fourie says the JSE’s private placement market will help diversify its revenue stream while assisting companies with access to funding, thereby contributing to economic growth and job creation.
“Our engagements with institutional investors and private companies suggest that the market is eager for this service because of the efficiencies it will introduce,” said Valdene Reddy, the JSE’s director of capital markets. “JPP will focus on SA SME and infrastructure funding and will extend its services to the rest of the African continent in due course.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.