The Zimbabwe Stock Exchange (ZSE) has had very few new listings over the last 24 months, a situation likely to continue if no proactive steps are taken to encourage more Companies to list.
One immediate and practical step which should be considered is the development of an Alternative Investment Market (AIM) to list firms which do not meet ZSE requirements but have potential and ambition to list in the short to medium term. This could act as a preparatory stage for an eventual listing on the ZSE.
This market will allow small to medium sized companies to raise cheaper capital in the form of equity and raise their public profile while preparing for an eventual listing on the main ZSE Board
Exchanges provide several ways to take a company public, such as:
Initial Public Offering (IPO)
Reverse Takeover (RTO)
Direct Listing ( market introduction)
The best option for a company will depend on its financial, legal, auditing and business strategy requirements. Normally, a team of advisors led by the investment bank assist the firm with this decision.
There are a few areas which the firm to be listed must consider and work towards in order to be listed on the stock market.
Creating an established business with a track record is normally the starting point. Other relevant and important areas include:
Strong management team must be in place
Growth prospects must look good for medium to long term
Solid business plan must be in place
Sound financial plan has to be developed
Strategic marketing plan to keep revenues growing
The proposed alternative investment market will provide a unique trading forum for listed companies that are below existing ZSE listing standards. This gives small firms an opportunity to access resources which are normally reserved for blue chip companies.
While preparing for a listing on the AIM, the entrepreneur and his team need to work on the following:
Are the key management positions filled by experienced and qualified individuals?
Is the management team experienced and balanced, with sufficient directors and senior executives with a proven record in managing a public company who can protect the interest of the investing public?
Zimbabwes small to medium companies will benefit from the support and visibility provided by listing and a trading environment tailored to their needs.
Zimbabwes financial markets are well regulated and rank among the top in Africa and other emerging markets. The establishment of the Securities Exchange Commission has provided more oversight and increased supervision on the capital markets. This make the time ripe to add an AlM.
It should have simple, easy-to-read rules and streamlined filing obligations, in order to reduce the complexity of compliance thus giving the new companies more time to focus their efforts on strengthening and growing their businesses.
While seeking a listing on the proposed alternative exchange market, prospective listing candidates need to consider the following:
Is the market size for the companys product or service sufficient to attract broad investor interest to make share value reasonable and stable?
Is the company profitable, or has its product reached commercialization with evidence of market acceptance that can be enhanced by greater access to more resources?
At the time of listing, will the company have sufficient working capital to carry out its business plan and meet its daily capital requirements?
Zimbabwes small to medium scale firms remain underfunded mostly due to the liquidity shortage in the market. This is further worsened by the listing requirements of the ZSE which are exclusionary and not inclusionary. This helps build a strong case for the need to urgently set up an alternative listing market to serve that niche of firms that are keen to list but do not yet meet the ZSE listing requirements.
Disclaimer
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Post published in: Manufacturing