It might seem that the most obvious reason for a company to list on the JSE is to raise capital. However, speaking at The 2016 Money Expo the head of primary markets at the JSE, Prejelin Naggan, said that this is not the only rationale for listing.
“There are three broad reasons,” he said. “The first is to raise capital, the second is to potentially take money off the table for a shareholder, and the third is to raise the company’s profile.”
For three companies that have listed in the last few years, it is actually the third reason that has been the most important.
When Cartrack listed around 18 months ago it was cash positive and therefore not looking to raise funds. The reason for listing was more about growing its profile.
“We’re a global business, expanding significantly within Europe, Asia, other countries in Africa and we are currently looking to set up in the US,” said global CFO John Edmeston. “One of the fundamentals for our listing was to have an entity that has credibility, that has transparency, that is seen by potential investors as having good corporate governance, and to elevate our status in order to penetrate these new markets where you are coming in as an unknown entity.”
Although the company may be well known in South Africa, being listed has been a big advantage in building its name and reputation in other markets.
“The real reason for listing was exposure to the market,” Edmeston said. “You have to get stuck into the PR aspect of your business, get intimately involved with the media, get your name out so that people understand who you are and what you are.”
Peter Armitage, the CEO of Anchor Capital, said that listing has proved extremely beneficial in supporting business growth.
“Given the kind of business we are in and what my background was, moving on to a listing was a logical step,” Armitage said. “We had a lot of demand for equity and ownership in our business, we thought market conditions were good and we had a good story to tell.
“In a small time period we have gone from a company making R5 million two years ago to making over R100 million,” he added. “That’s good organic growth, but also taking advantage of the opportunities the JSE offers us.”
Another financial services company, Sygnia, has also seen substantial benefit from listing. CEO Magda Wierzycka said that it has transformed the image of the business.
“Before the listing we were a bit of a chihuahua in the room and it was possible for other financial services companies to ignore us,” said Wierzycka. “Listing has given us the profile and substance to be taken seriously by other financial services companies and that is a prerequisite to being taken seriously by man on the street.”
She added that the listing has also provided an enormous number of PR opportunities.
“It’s not only the competitors that takes us more seriously, the media takes us more seriously as well,” she said. “Suddenly we have a voice and we try to engage with the media actively. The listing has been the very best thing we could have done in the evolution of Sygnia to get our message out there.”
Naggan said that while these positives make listing very appealing, companies also have to be aware that it also comes with some onerous requirements.
“People aren’t always aware prior to listing that they will be in the public eye now,” he said. “There is a lot of compliance and governance that goes into maintaining a successful listing. There is a lot of stakeholder management that you wouldn’t necessarily have if you were unlisted. You are also sharing control with new shareholders.”
He said that in many cases companies that are interested in listing do not meet the JSE’s requirements and are therefore not eligible.
“There is a lot of interest from companies who may not quality for a listing but are keen on a listing because they want to raise the profile of the company or themselves,” said Naggan. “We have very strict requirements and there are companies that would like to list but don’t meet those criteria.”
However, the opposite is also true.
“There is a whole bunch of companies that think they don’t qualify when they actually do,” Naggan added. “So it might be a mistake to think that you aren’t capable of a listing.