Alternative exchange for SMEs
30 January 2004
Africa's first alternative exchange for small to medium growing companies, AltX, has opened its doors for trading.
A partnership between the JSE Securities Exchange SA and the department of trade and industry (DTI), AltX will give a range of smaller companies the opportunity to issue new shares, raise capital, widen their investor base and have their shares traded in a regulated market.
Speaking at the launch of AltX in October 2003, DTI Director-General Alistair Ruiters said AltX complements the government's black economic empowerment policies by creating a space for more black companies to participate in the JSE, adding that the DTI would provide financial support to firms that list on AltX.
"What is also important about this initiative is that we will mentor these companies, providing support and management capacity building. The DTI will pay for all these costs", Ruiters said.
JSE chief executive Russel Loubser said AltX would
act as a springboard for smaller companies eventually to list on the JSE's main board. He warned, however, that AltX will not become a dumping ground for JSE main board struggling companies.
According to AltX manager Noah Greenhill, AltX's first listing, toiletry manufacturer and distributor Beige, was thoroughly screened before the listing was approved. "This included presenting to the AltX advisory committee, comprised of a number of market experts, as well as the executive committee of the JSE."
Greenhill also said that Beige, as the first AltX-listed company, would be subject to intense scrutiny, because AltX would depend ultimately on quality listings that would ensure investor confidence in the new market.
Beige CEO John Rawlings said: "Beige is an entrepreneurial company, focused on sustainable growth, and we believe that we are a perfect fit for
AltX".
Reduced listing fees, full range of services
AltX is differentiated from the main board at the JSE in many ways, with separate listing requirements. "Ideally, companies that list on AltX will be future large companies that will eventually migrate to the JSE main board", AltX says on its website.
AltX has reduced listing fees, but is supported by the full range of JSE services - including the trading of shares on the same system as the main board, market surveillance to eliminate irregularities, and settlement of AltX securities through the JSE's electronic system, STRATE.
AltX has listing requirements appropriate for small and medium companies, placing emphasis on initial and ongoing disclosure of company information. There is also a focus on the enhancement of the skills of directors of AltX companies, with a compulsory four-day directors' induction programme offered by the Wits
Business School.
Companies require no profit history to list, but a minimum share capital of R2-million is required.
The JSE has also signed an agreement with Societe Generale to slash the cost of post-trade administration services for AltX investors.
"By reducing our wholesale AltX transactions charges, our hope is that institutional clients will pass these cost-savings on to their clients at a retail level", said Societe Generale head of global securities Matthieu Pasquier "This will incentivise trading liquidity and attract investors to the AltX market."
Greenhill said that AltX would target junior mining companies as well as black economic empowerment companies, among others.
"We researched parallel exchanges internationally, and have incorporated best practice into AltX", Greenhill said. "The most successful parallel market has been AIM in the UK, which has admitted more than 850 companies since it opened in 1995. Collectively, these companies have
raised more than US$10-billion while on AIM."
The success of AltX, Greenhill said, would be based "on a philosophy which emphasises relationship management, marketing and continuous education."
Loubser added: "All companies start small, and we are committed to supporting the burgeoning SME [small and medium enterprise] sector of the South African economy."
SouthAfrica.info reporter
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