The Ghana Stock Exchange (GSE) is developing a second market targetted at small and medium enterprises (SMEs) to improve their participation on the exchange.
This alternative market will have relaxed pre- and post-listing requirements to remove the barrier of stringent standards that currently limits the ability of SMEs to raise equity on the exchange.
“The concept of the alternative market is to address complaints by SMEs about the stringent criteria that make it impossible to use the market to raise equity for their businesses,” Kofi Yamoah, Managing Director of the GSE, said.
Last year, the exchange signed a memorandum of understanding with a private equity fund-manager specialising in SMEs, Fidelity Capital Partners Limited, to use the market as an exit-vehicle for investee-companies under the fund’s management.
New rules for the second market are still being discussed, he said, and will reflect changes to financial- reporting obligations, the minimum stated capital required and the minimum age of a company.
The GSE expects to kick-off the initiative in 2012, after the proposal has been approved by its council and the green-light to proceed granted by the Securities and Exchange Commission (SEC).
“Tentatively, we’re looking at GH¢250,000 as the minimum stated capital, and the SME should have been in operation for at least a year. But we’ll also consider greenfield companies that have the potential to be profitable,” Yamoah said.
Under existing rules, a company should have been in operation for at least three years with a minimum stated capital of GH¢1 million to qualify to list. And once listed, the entity is required to publish its financial statements quarterly.
For the new SME market, listed entities will be mandated to publish their statements half-yearly. Yamoah said the exchange is also planning to set up a revolving fund to be used for pre-financing listing charges and costs that SMEs incur during the process of launching a public offer.
“We’re doing this in partnership with the African Development Bank which has a huge interest in SMEs, and the response so far has been positive,” he said.
The exchange has taken measures to boost liquidity and trading, he said. Among them is a new requirement for companies to increase the number of their issued shares to 100 million. Of the 35 listed entities, 15 have been affected by this policy.
SEC is also considering a proposal to increase the minimum capital of licenced dealing members on the exchange. More capital would help dealers trade more stocks and create demand when the market is lean.
In the second half of 2011, stocks on the GSE gave up gains they had made in the first half, after trading activity diminished and foreign investors held back fund flows expected to boost liquidity.
The market’s all-share index went down percent 3.1 percent in 2011, reversing a half-year gain of 18.9 percent.
Yamoah told B&FT the exchange is courting the public utilities with proposals for them to issue corporate bonds that are tradable on the market to finance their capital investments.
“We believe this would make it easier to them to go public when they decide to in future.” The GSE is still pursuing the listing of oil firm Kosmos, which has the second-largest interest in the Jubilee-Field partnership, he said.
Kosmos had been expected to launch a GH¢50 million initial public offer in the third quarter of 2011, but Yamoah said it encountered “difficulties” related to approvals from the United States, where the company is headquartered.
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