The Zimbabwe Stock Exchange (ZSE) has had a very few new listings over the last 24 months ,a situation that is likely to continue if now proactive steps are taken to encourage more Companies to list of the ZSE. One immediate and practical step which should be considered is the development of an Alternative Investment Market to list firms which do not meet ZSE requirements but have potential and ambition to list in the short to medium term. This market will act as a preparatory stage for an eventual listing on the ZSE .
This market will allow small to medium sized companies ability to raise cheaper capital in form of equity and raise their public profile whilst preparing for an eventual listing on the main ZSE Board .
Exchanges provide several ways in which to take a company public which include:
• 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 team of advisors led by the lead advisors( Investment Bank) assist the firm with this decision.
There are 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 towards a public listing. 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 ZSE ongoing listing standards. This gives small firms an opportutnity to access resources which are normally reserved and accessed by blue chip companies ;
Whilst preparing for a listing on the Alternative Investment market the entrepreneur and his team need to carefully 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 investing public funds interests?
Zimbabwe’s small to medium companies will benefit from the support and visibility provided by a listing and trading environment tailored to their needs on the proposed Alternative investment Exchange market.
Zimbabwe’s financial markets are well regulated and rank amongst the top in Africa and emerging markets. The establishment of the Securities Exchange Commission has further provided more oversight and increased supervision on the capital markets which makes it ripe to add an Alternative Investment exchange since there are sufficient resources and expertise from the Securities Exchange Commission ,The Reserve Bank of Zimbabwe and the ZSE.
The alternative investment market will have simple, easy-to-read rules and streamlined filing obligations, which reduces the complexity of complying with exchange policies - giving these companies more time to focus their efforts on strengthening and growing their businesses.
Whilst seeking a listing on the proposed alternative exchange market, prospective listing candidates need to consider the following leads ;
• Is the market size for the company’s 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?
Zimbabwe’s 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
All information on this site is provided "as is" for informational purposes only, not intended for trading purposes or advice. Prior to execution of any security trade, you are advised to consult your authorized financial advisor to verify the accuracy of all information. Neither GMRI Capital nor any independent provider is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.
This article was prepared exclusively for The Zimbabwean Newspaper by ENG Advisory Services and GMRI Capital, Divisions of ENG Capital Group.
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