Three small enterprises will on Friday usher in a groundbreaking chapter for the JSE in its most ambitious initiative in a generation to encourage small firms to list and remain on the exchange.
Finbond, Santova and PBT were granted approval to trade on the JSE’s “general” segment. This comes after the Financial Sector Conduct Authority (FSCA) decision last month to endorse amendments to JSE’s listing requirements for the market segmentation project.
The initiative, announced in April, splits the JSE’s main board into two segments, tailored to meet the needs of large corporations and smaller firms. The main board will be divided into “prime” and “general”, with smaller companies trading in the general segment. This action is designed to minimise regulatory burdens and the costs associated with listing on the JSE for smaller companies.
Finbond, worth about R530m on the JSE, and Santova, worth just under R1bn, and PBT will be the first companies to have their securities trade on the general segment.
“The board of directors of Finbond is pleased to announce that the company’s application to transfer its listing to the general segment of the main board of the JSE has been approved by the JSE with effect from Friday, October 18. Consequently, Finbond will now be classified as being a primary issuer listed in the general segment of the JSE list,” said Finbond. Santova and PBT issued similar statements.
Delistings
The JSE hopes segmentation will curb the trend of delistings by making it more appealing for small- and mid-cap companies to stay listed. Delistings on the JSE have seen Africa’s largest stock exchange halve in size in two decades. Delistings curtailed trading volumes and shrunk options for savers.
Benefits accruing to smaller issuers listed on the general segment will include flexibility to raise capital through the introduction of a general authority to issue shares for cash without shareholder approval, subject to a prescribed limit and pricing limitations. Another reform will see groups listed on the general segment being permitted to prepare an annual report within four months instead of the current three-month deadline.
The JSE has removed fairness opinions for related-party transactions/corporate actions, with more emphasis placed on shareholders’ approval.
The reforms are among the most consequential in 20 years. It launched alternative exchange AltX for small and mid-sized listings in 2003, but it failed to retain and attract new listings.
Applications for issuers that seek to apply for the general segment opened on September 23.
The JSE was criticised for onerous regulations and requirements for small firms, with the cost of being listed excessive for firms not having the financial muscle of their bigger counterparts.
It is not only small firms that have been delisting. Some of the exchange’s erstwhile darlings also exited, due mainly to corporate actions. They included Pioneer Foods, Mediclinic, Distell, Massmart, PSG Group, Clover, Royal Bafokeng Platinum and Liberty. The JSE’s plan is to rewrite its listing requirements and cut red tape that made it unattractive for local and offshore companies.
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