16 March 2006
The JSE Limited, ranked seventh in the World Federation of Exchange’s top 10 performing markets last year, has unveiled plans to list on its own exchange in June, and to increase the level of black shareholding in Africa’s biggest bourse through an innovative two-part empowerment initiative.
Making the announcement in Johannesburg on Wednesday, the JSE said the listing would boost its liquidity, open additional avenues for raising capital, and “place the JSE on the same footing as the leading international exchanges whose shares are now listed, thereby facilitating comparison between the JSE and these exchanges.”
A number of exchanges around the world, including the biggest, the New York Stock Exchange, have listed recently, with strong investor response.
JSE CEO Russell Loubser told Business Day that the listing would boost the exchange’s profile and attractiveness to investors.
Piet Viljoen, chief investment officer of Regarding Capital Management, told Business Day: “We think [the JSE] is a fantastic company. It’s basically one of the best businesses you can invest in, with it being a monopoly.”
2005 was a record-beating year for South Africa’s only stock exchange, with foreigners buying a record net R50-billion worth of local shares, the All Share index rocketing 43% – reaching countless record highs in the process – and the JSE’s market capitalisation increasing by 40% over 2004.
According to Business Day, the JSE recorded a 53% increase in profit to R106-million for the year to December, and the exchange ranked seventh in the World Federation of Exchange’s top 10 performing markets for 2005.
Increasing black shareholding
The JSE said it would use the listing as a platform to establish a JSE empowerment fund – using 2% of the JSE’s issued share capital to fund the education of young black South Africans in the financial services field – as well as a black shareholder retention scheme.
The initiative will serve to increase the JSE’s proportion of black shareholding from the current 9%, bringing it in line with financial sector’s black economic empowerment (BEE) charter, which prescribes a minimum 10% BEE shareholding.
The black shareholder retention scheme aims to encourage black South Africans to buy and retain shares in the JSE until June 2011, by offering black shareholders the option of buying a set number of shares at 20% of the prevailing share price.
The share options, exercisable in June 2011, will be offered in three tranches, in June 2006, 2007 and 2008.
The JSE cautioned that while its listing was not conditional on shareholder approval of its BEE initiative, it would “reconsider the appropriateness of the listing if these initiatives are not approved by shareholders”.
Boosting visibility, liquidity
The JSE has operated as a marketplace for trading in financial products for nearly 120 years.
In this time, it has evolved from a traditional floor-based equities trading market to a modern securities exchange providing fully electronic trading, clearing and settlement in equities, financial and agricultural derivatives and other associated instruments with extensive surveillance capabilities.
Since its demutualisation in July 2005, the JSE has been operating as an unlisted public company, with trading in JSE shares – which represented an ownership stake in the former mutual entity – limited to over-the-counter trades.
Prior to Wednesday’s announcement, the JSE’s shares were trading in the over-the-counter market at between R140 and R160 each, valuing the group at between R1.17-billion and R1.33-billion.
Following Wednesday’s announcement, according to Business Day, the JSE’s share price leapt to R187 per share – 17% up on Tuesday’s close, and more than 600% up on July 2005, when the JSE’s stock started out at R30 apiece.
Listing, the JSE said, was “the next logical step” in its corporate evolution.
Demutualisation has saddled the JSE with all the obligations of a listed company while giving its shareholders “none of the benefits of a truly transparent and easily accessible market in which to trade JSE shares.”
Going public, the JSE said, would provide an appropriate platform for trading in JSE shares that would “improve the visibility and potentially liquidity in JSE shares and hence ensure that a clear and transparent price is achieved for buyers and sellers”.