AltX riding stock exchange wave

8 January 2006

AltX, Africa’s first alternative exchange for small to medium and growing companies, is riding the wave of the private sector’s bullish sentiment about the South African economy with a number of important new listings.

A partnership between the JSE Limited and the Department of Trade and Industry (DTI), AltX gives smaller companies the opportunity to issue new shares, raise capital, widen their investor base and have their shares traded in a regulated market.

On Tuesday ACC-Ross Holdings, a golf estate, residential and leisure property development company, said it would list on the exchange next week. On Wednesday industrial group PSV Holdings announced a listing planned for April. Building materials supplier WG Wearne revealed plans to list last month.

With a market capitalisation of over R1-billion, ACC-Ross will be the biggest listing on AltX so far. The group may consider listing on the JSE’s main board at a later stage.

“We have had huge support from AltX in our listing plans,” ACC-Ross CEO Jaco Verster told Business Day.

PSV supplies pumps, valves and electromechanical systems to the mining, petrochemical and water and waste management sectors. With an expected market capitalisation of R206-million, it will become the third-largest listing on the exchange.

According to Business Day, analysts believe there will be more listings in the industrial sector in the next few months as investment by government and the private sector gains momentum.

Empowering small companies
Launched in October 2003 as a parallel market to the JSE, AltX is specifically aimed at fast-growing businesses, start-ups, family-owned businesses, black economic empowerment companies and junior mining companies.

DTI director-general Alistair Ruiters says the exchange complements the government’s black economic empowerment policies by creating a space for more black companies to participate in the JSE, adding that the DTI would provide financial support to firms that list on AltX.

“What is also important about this initiative is that we will mentor these companies, providing support and management capacity building,” he says. “The DTI will pay for all these costs.”

AltX is differentiated from the main board at the JSE in many ways, with separate listing requirements. The idea is that companies listed on AltX will be future large companies that eventually migrate to the JSE main board.

The alternative exchange has reduced listing fees, but is supported by the full range of JSE services – including the trading of shares on the same system as the main board, market surveillance to eliminate irregularities, and settlement of AltX securities through the JSE’s electronic system, STRATE.

Developing management skills
AltX has listing requirements appropriate for small and medium companies, placing emphasis on initial and ongoing disclosure of company information. There is also a focus on the enhancement of the skills of directors of AltX companies, with a compulsory four-day directors’ induction programme offered by the Wits Business School.

Companies require no profit history to list, but a minimum share capital of R2-million is required.

“We researched parallel exchanges internationally, and have incorporated best practice into AltX,” says AltX manager Noah Greenhill. “The most successful parallel market has been AIM in the UK, which has admitted more than 850 companies since it opened in 1995. Collectively, these companies have raised more than US$10-billion while on AIM.”

The success of AltX, Greenhill says, is based “on a philosophy which emphasises relationship management, marketing and continuous education.”

“All companies start small, and we are committed to supporting the burgeoning small and medium enterprise sector of the South African economy.”

SouthAfrica.info reporter