Home / Publications / Secondary listing on the Johannesburg Stock Excha...

Secondary listing on the Johannesburg Stock Exchange

Secondary listing on the Johannesburg Stock Exchange

Introduction

The Johannesburg Stock Exchange (JSE) is one of the top 20 exchanges by market capitalisation globally and Africa's largest stock exchange. It is an exchange with a strong track record and benefits from good regulation and systems that meet international market standards. Another interesting feature of the JSE is the number of companies listed on the JSE that are also listed elsewhere. They include South Africa based companies that have a listing on another exchange (around 70 companies), but also companies established outside South Africa that have listed their shares on the JSE by way of a secondary listing (around 65 companies). This briefing focuses on the possibilities for companies whose shares are listed elsewhere to create a secondary listing of their shares on the JSE.

Reasons for a dual listing

There are various reasons why a company whose shares are already listed on another exchange may consider a secondary listing of its shares. Such secondary listing could diversify its investor base, in particular, where the target investor market is as a result of regulatory, geographical or time-zone reasons fragmented. It may also improve brand recognition in the market of its secondary listing and show commitment to the region in which it is operating. If the company wishes to establish equity-based employee incentive schemes for its local employees, then a secondary listing may also be opportune for regulatory or tax reasons. 

Why a dual listing on the JSE?

A secondary listing in South Africa will have additional advantages since it enables the company to access investors in Africa's most sophisticated financial hub that attracts a large number of regionally operating investors and financiers. It also provides access to South Africa's well established institutional and retail investor community. For the latter, it has an advantage that, since the shares will be traded in ZAR, the investment in securities listed on the JSE does not require the use of foreign asset allowances under South Africa's foreign exchange regulations. On the other hand, the capital raised by the company in South Africa is freely transferable overseas and does therefore not need to be applied locally. As will be discussed in more detail below, the JSE facilitates secondary listings of foreign companies by taking a pragmatic approach towards secondary listings through the application of a fast-track listing process and streamlined disclosure requirements.

How to list on the JSE?

The JSE has two markets, namely the JSE Main Board and AltX. The latter is a parallel market focused on good quality, small and medium-sized high growth companies and operates as a springboard onto the JSE's Main Board. Both markets permit secondary listings. A secondary listing is possible if the company is already listed on a "recognised exchange". Recognised exchanges for this purpose are in relation to the Main Board, (i) Australian Securities Exchange (ii) London Stock Exchange (iii) NYSE (iv) Toronto Stock Exchange (v) Nasdaq Stock Market (vi) Euronext Amsterdam (vii) Euronext Brussels (viii) Frankfurt Stock Exchange (ix) Luxembourg Stock Exchange and (x) SIX Swiss Exchange.

For the AltX market, it also includes members of the World Federation of Exchanges. The JSE facilitates compliance with its rules by allowing a company to comply with continuous disclosure requirements of the exchange of its primary listing in lieu of those of the JSE.

Listing Rules

A summary of the listing requirements for the JSE Main Board and AltX is set out below, however, the JSE can agree to deviate from these requirements for investment entities and mineral and property companies.

JSE Main Board

Subject to preparing a pre-listing statement, applicants seeking to list on the JSE's Main Board must, amongst others:

  1. have a primary listing on an approved exchange on at least on an equivalent board/exchange to that for which application is being made on the JSE;
  2. have a subscribed capital of R50,000,000;
  3. have equity shares in issue of not less than R25,000,000;
  4. provide audited financial statements for the preceding 3 (three) financial years, with an audited profit of R15,000,000 pre-tax taking into account the headline earnings adjustment on a pre-tax basis or have a subscribed capital of R500,000,000;
  5. carry on an independent business as its main activity, either by itself or through subsidiaries, supported by historic revenue-earning history allowing it to control the majority of its assets and have done so for a period of at least 6 (six) months or invested a majority of its assets in securities of other companies listed on the JSE for a period of at least 6 (six) months or 12 (twelve) months; and
  6. ensure the public hold 20% of each class of equity securities to ensure reasonable liquidity.

AltX

Subject to preparing a pre-listing statement, an applicant issuer applying for a listing on AltX must, amongst others:

  1. have a primary listing on an approved exchange on at least on an equivalent board/exchange to that for which application is being made on the JSE;
  2. appoint a Designated Adviser ("DA") and ensure the DA complies with the Listings Requirements, unless provided that the applicant issuer appoints and maintains a sponsor;
  3. have share capital of at least R2,000,000;
  4. ensure the public hold a minimum of 10% of each class of equity securities to ensure reasonable liquidity.
  5. appoint an executive financial director satisfactory to the applicant issuer's audit committee as to the financial director's expertise and experience;
  6. produce a profit forecast for the remaining financial year of listing and one full financial year thereafter; and
  7. the applicant must have control (which for the purposes of this section is defined as at least 50% + 1 of the voting shares) over the majority of its assets.

Fast track listing procedure

In simplify the listing process, the JSE introduced a fast-track listing process to allow companies already listed on major stock exchanges for a period of at least 18 months, to place a secondary listing on AltX or the JSE's Main Board. The following exchanges are accredited by the JSE for the fast-track listing process (i) Australia Stock Exchange (ii) London Stock Exchange (iii) New York Stock Exchange (NYSE) and NYSE Euronext, and (iv) Toronto Stock Exchange.

The JSE can accredit other exchanges on an ad-hoc basis. Companies listed on accredited exchanges that use the fast-track listing process do not need to submit a pre-listing statement but only announce the listing. The announcement should contain certain disclosure items pursuant to the listing requirements and details of the actual listing on the JSE, which has been prepared in accordance with the requirements of its primary listing. The fast-track listing process aims to reduce the time and costs associated with a secondary listing.

Assistance with listing

Prior to listing on the JSE, companies should consider appointing competent and experienced professionals to assist and advise on, inter alia, the applicability of the listing requirements, the responsibilities and obligations of directors of a listed company, drafting and submitting listing documents, reporting on the profits and financial position of the company for the preceding three years, approvals required to list, printing and issuing share certificates, promoting the image of the company, and various other issues relating to the listing process.

Continuous disclosure

Subject to limited exceptions, the JSE will allow the requirements of the primary exchange to take precedence in relation to applicant issuers with a secondary listing on the JSE. The exceptions are mainly intended to ensure a coordinated disclosure of information in the markets of its primary and secondary listing.

Conclusion

The JSE has adopted various measures to facilitate the listing of companies that already have a listing on another reputable securities exchange. This offers companies an opportunity to extend their investor base as well as improve brand recognition in one of the leading global financial markets.     

Authors

Portrait of Pieter van Welzen
Pieter van Welzen
Senior Consultant
Johannesburg
Portrait of Sihle Bulose
Sihle Bulose
Partner
Johannesburg