Many investors ask “How does a company get listed on the stock exchange?”
A company can be listed in 2 ways. First, it can raise money from new investors and issue them with new shares, or existing shareholders can sell down their holding to new investors, or a combination of the two. This is known as an initial public offering or IPO. Second, it may already have many shareholders and may be eligible for listing without raising new money. This is known as a compliance listing.
Either way, the company must satisfy PNGX that it is suitable for listing. It does this by meeting the minimum requirements set out in the PNGX Listing Rules which are available on the PNGX website.
In summary, the main minimum requirements are currently:
- The company’s structure and operations must be appropriate for a listed entity;
- A prospectus must be lodged with the Securities Commission;
- There must be at least 300 shareholders each holding shares with a value of at least K2,000; and
- The company must satisfy either the “profit test” or the “net tangible assets test”:
To satisfy the profit test the company must have:
- been in the same business for at least 3 years;
- audited accounts for at least 3 years;
- made a total of at least K600,000 profit over the last 3 years; and
- made at least K250,000 profit in the most recent year.
To satisfy the net tangible assets (NTA) test the company must have:
- NTA of at least K1,500,000;
- less than half its assets in cash or cash-like assets;
- enough working capital to carry out its stated objectives;
- audited accounts for at least 3 years; and
- a business which is developed to the point where it is reasonably likely that it will generate revenue from its ordinary activities within the next 3 years.
The NTA tests for mining exploration companies and investment companies are slightly different.
As will be apparent from the above, getting listed will involve working with PNGX, the Securities Commission, accountants and auditors (for the preparation of accounts), lawyers (for the preparation of a prospectus and other matters), a share register (to record the shareholders) and a stockbroker (for the sale and pricing of an IPO). It may also involve other parties.
The process of becoming listed may currently take a company 1 to 2 years from the time the Board decides to list until the time it becomes traded on PNGX.
There are many companies which could become listed on PNGX. PNGX is currently reviewing the minimum requirements for listing to see if the market can be made more attractive for more companies. It is expected the new requirements will be available by the end of the year.
PNGX is also working towards launching a new market for corporate debt. This will be another form of listing on the market and will have different minimum requirements. It could help raise funds for property development, infrastructure development or medium to large companies wishing to raise funds without losing ownership control.
The current listing standards do not suit SMEs or start-ups. PNGX is exploring whether new markets can be developed to help SMEs and start-ups to raise funds. The development of markets for these companies can be complex and take time.
If there is enough demand, PNGX could also develop markets to assist co-operatives to raise funds.
So, while the requirements for listing currently focus upon larger, well established companies, PNGX always welcomes opportunities to consider new types of investment and markets which can help PNG develop in a way which maintains investor confidence.
The information in this article is general in nature and you should take care to inform yourself about the specific characteristics of a particular investment before making a decision to invest in it. PNGX recommends discussing your investment objectives and needs with a stockbroker or qualified financial adviser. In PNG, you can either contact JMP Securities Limited or Kina Securities Limited.
By following these articles and reading more information available on the PNGX website (www.pngx.com.pg) you can build your wealth and invest in PNG
