The adoption of the King IV Code will have an immediate impact on companies planning to issue circulars on or after 1 October 2017 for the purposes of seeking a listing on the Johannesburg Stock Exchange (JSE).
At the same time, potential investors can expect to see JSE-listed companies display much more transparency as the regime for King IV moves to comply and explain.
This is according to Duncan Dollman, partner at auditing consultancy Mazars, who adds that the JSE’s latest set of listing requirements will present some additional challenges for listed companies and applicant issuers seeking a listing on the Exchange.
“The King IV code, which was adopted by the JSE, requires companies to disclose more information relating to their governance and their compliance with various requirements,” he said.
“Where companies do not comply with any regulation, they are also now required to publish their reasons for non-compliance. This means that investors and potential investors will be able to get much more disclosure from annual reports.”
Cost of raising capital on the JSE
These increased listing demands mean that companies aiming to list on the JSE must build in a realistic expectation for the cost of raising capital and listing securities, said Dollman.
“One of the aspects that businesses need to have is a very clear understanding of what they will need to spend in order to raise capital,” he said.
He explained that a team of professionals comprising of skilled and experienced advisors needs to be appointed to facilitate a listing of securities.
“To give one example, Dis-Chem Pharmacies which listed in November 2016, in addition to the statutory sponsor and reporting accountants, added legal advisors, transaction sponsors, bookrunners and a stabilisation manager to its professional team.
“The company budgeted to spend, based on information contained in its pre-listing statement, around R345 000 for each R10 million of capital raised. Premier Food and Fishing, which listed recently, expected to spend around R12.7 million in total to raise R525 million, which amounted to R241,000 per R10 million of capital raised,” he said.
The following are the official prices provided by the Johannesburg Stock Exchange as of 1 January 2017.
You can also use a calculator provided by the JSE to get a better idea of the costs involved.
The table below applies to new listings on the Main Board as well as secondary capital raising for AltX and the Main Board.
The monetary value of securities is determined by:
- the number of securities for which application for listing is made multiplied by the issue price per security;
- where no market related price is attributable to the securities to be listed, they will be deemed to have a value calculated by multiplying the number of securities listed by the closing price on the declaration date; and
- where no price is attributable to the securities, they will be deemed to have a value calculated by multiplying the number of securities listed by the closing price on the first day of trading.
Annual Listing Fees for Companies: Main Board
In additional to an initial listing price, listed companies are also expected to pay an annual fee.
The fee can be calculated as follows:
- Market capitalisation is calculated by taking the average market capitalisation of the securities over the previous year.
- Find the corresponding market capitalisation tier for the securities.
- Multiply the residual amount of market capitalisation that exceeds the lower limit of the tier by the variable charge (remember that the variable charge is per million).
- Add the result of the above calculation to the minimum fee for the appropriate tier.
- Notwithstanding the above, where more than one of the aforesaid classes of securities are listed, the issuer shall pay the higher annual listing fee only.
An example of this calculation provided by the JSE shows:
Company with a market capitalisation of R550 million
= ((550 million – 500 million)/1 million)*50 + R 226,360
Other major fees
There are several other fees companies can expect to pay, depending on how they have structured their listing.
Among other costs these include:
- Documentation fees fee for MainBoard & AltX – R82,680.
- In respect of each class of security listed, an annual listing fee shall be paid by 28 February of each year – R34,000.
- Listing fees for additional securities (price dependent on market cap).
- Additional fees for Warrants & Structured Products (price dependent on package).
- A new issuer will be charged a documentation fee of R82,680 for the listing of the Asset Based Securities. The annual listings fee shall be calculated at 1 basis point of the value of the ABS with a maximum of R401,215.
- VAT is payable on all fees charged by the JSE.