After 120 years of convincing companies of the merits of listing and being publicly traded, the Johannesburg Stock Exchange (JSE) will on June 5 list on its own main board, joining peers including the London Stock Exchange.
The move is the culmination of about five years of restructuring the bourse. The last step in preparation for the listing was the JSE’s demutualisation in July last year.
JSE shares are currently held by members as rights and cannot be publicly traded. In the period between July last year and the end of last year, the JSE saw its shares rise from R30 to about R125. It currently trades at between R140 and R160.
Nicky Newton King, deputy CEO of the JSE, says the aim of the listing is not to raise capital, but rather to create an opportunity to have its shares traded transparently. The listing does offer a raising option should the need arise.
To meet one if its listing requirements of having a minimum of 25-million shares in issue, the JSE will split its 8,3-million shares into 10 shares for each share currently held. Newton King notes that the split was in part to meet listing requirements, but also to make the share price more attractive.
To meet the listing requirement, it would need a split of four shares for every one it has, but that would bring the price down from R160, to R40, which might still prove prohibitive for ordinary investors. In its proposed split, the price range will be about R 14 to R16.
The listing also has an empowerment component, designed to enhance the JSE’s 9% direct black shareholding. This will see 2% of issued share capital after the split allocated to a JSE empowerment fund. This will be used to fund black students for studies in financial services. A further 2% will be used in a black shareholder-retention scheme. This will see any black shareholder or black-owned company that purchases shares before the end of March qualify to purchase them at 20% of 30-day average.
Thus, at last December’s ruling price of R125, qualifying shareholders will purchase the shares at R2,11. Based on the JSE’s 2005 financial results, the empowerment schemes will dilute its headline earnings per share from 122c to 85c, and its net asset value per share from 818c to 798c.
The JSE will list on the investment services sector, where it will join peers including PSG Financial services and Cadiz Financial Strategy Group, the country’s top derivatives-trading firm.
Xolani Nhlapo, an equity trader at Cadiz , notes that the listing has a number of positives. This is because it allows for comparison with its peers. But also because the split as proposed makes it accessible to the ordinary investor.
Nhlapo notes that investors will benefit since the JSE has a monopoly on the trading of equities, through its main board and Altx, and derivatives, following its purchase of the South African Futures Exchange a few years ago.
Nhlapo adds that the one issue the bourse will have to get to grips with is how best to offer a bond-trading platform, as these are currently traded through the Bond Exchange, a separate entity, and its recently launched Yield X has not attracted sufficient volumes.
Newton King concedes that years of talks with the Bond Exchange have not yielded fruit, but the JSE will continue to develop a bond-trading platform. In its 2005 financial year, the bourse made a profit of R107-million from revenue of R408-million.