The Ghana Stock Exchange (GSE) has hinted that it will be undertaking steps to relook at the Ghana Alternative Exchange (GAX) to make it more attractive for potential companies to list.
The Managing Director of the GSE, Ekow Afedzie who made this known said, “we will redefine it to add new value preposition to attract new companies.”
Speaking to journalists at a day’s forum organized by the Institute of Financial Journalist (IFEJ) in collaboration with the GSE in Accra on Tuesday September 28, 2021, Afedzie admitted that the GAX has not performed to expectation hence the need to review it to make more appealing. So far 6 SMEs are listed on the GAX.
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| Ekow Afedzie, Managing Director -GSE |
Despite the proven benefits of listing on an exchange, SME's still shy away from being listed. This is because most owners of SME's are not willing to bring on board shareholders who would be legally referred to as owners of a company they didn't start, and above all make decisions for the company.
Again, most SME's are not willing to share in public the true and fair view of their accounts (mostly deficits due to mismanagement). This veil of privacy will be lifted once they go public, and their accounts will be published in the dailies, hence they refuse to be listed. It's therefore no news how start-up SME's that seems to have bright business prospects disappear in short times.
Also, the high standard and large-scale firm perceptions that are associated with listed companies is a challenge that ought to be addressed. It is important that SME's discard these perceptions and see the GAX as one of their own, established purposely to help develop their production capacities and scale of operation.
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Launched in 2013, GAX is a parallel market operated by the Ghana Stock Exchange. The aim of the GAX is to focus on Small and Medium scale Enterprises (SME's) with potential for growth. Even though the GSE lists SME's on their second and third official lists, the stated Share Capital requirement of GHc50m and GHc20m was too high for most SME's in Ghana, hence GAX registers and lists SME's at less and waived cost relative to listing on the main exchange (GSE).
In 2018, managers of GAX announced plans to increase the number of listings on the exchange to 50 by 2020 but this plan faced some challenges.
Benefits of GAX
Listing on GAX provides an opportunity to the owners of SME's to raise capital to fund new projects/undertake expansions/diversifications and for acquisitions. Companies like A1 bread and its peers could use this platform to raise fund to undertake expansions to other regions.
Again, listed securities are acceptable to lenders as collateral for credit facilities, as creditors are aware of their stated share capital with the Registrar General Department and would hence know the extent of loan to make available to SME's. A listed company can also borrow from financial institutions easily as it is rated favorably by lenders of capital.
After listing on an exchange, the Securities and Exchange Commission (SEC) and GSE outlines acceptable ways of managing a publicly listed company such as the capital maintenance rule. This helps minimized bad business decisions made by SME's which has potential of reducing the working capital of most SME's.
Listing on the market will put the company in the public's eye and as such give their products greater publicity and as well draw on board, individuals with interest in such firms. Through raising of funds from the exchange, SME's can now meet the required capital that most foreign investors deem to be acceptable before opening trading negotiations with firms. The GAX just as all other markets when well-regulated will help mobilise capital, diversify risk and channel resources into productive investments of SME's in the economy.
A company applying for listing on the GAX was expected to meet the following requirements;
Stated Capital
A company applying to list on the GAX must have a minimum stated capital of GH¢250,000 at the time of listing. The stated capital of GH¢250,000 shall be the capital after the company's initial public offer but prior to listing.
Public Float
The public float of the applicant must constitute a minimum of twenty-five percent (25%) of the total number of issued shares. The minimum number of public shareholders shall be twenty (20).
Period of Existence
Admission may be granted to a start-up company, provided the applicant submits to the GAX a 3-year business plan, demonstrating clearly the viability of the applicant.
Profitability
The company seeking admission to the GAX need not have recorded profits historically but must have the potential to make profit at least at the end of its third year of listing.
Sponsorship of Applicants for Listing
Licensed Dealing Members, Investment Advisors or Issuing Houses shall sponsor an application for listing on the GAX.
Cost of listing
Listing and application fees were waived. A GAX listed company only pays an annual fee of GH¢ 2,000.00.
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