A growing number of companies are listing on the Mount Vema Stock Exchange, according to a new data released by the Gollexi. But why are they listing and why on the Gollexi? According to economists at the Royal Mount Vema Foundation Academy, companies are not just listing because it creates a market for their stocks, or because it increases a company's ability to make acquisitions, but most importantly, they’re listing because it provides access to capital.
The Mount Vema Stock Market is less than a decade old and already has a total market capitalisation in excess of 2 billion golles and is expected to exceed 100 billion golles by 2020. The market aims to be the largest stock exchange in Southern Africa, including the South Atlantic and the region's most internationally focused as the regional financial center with all the major banks already signing up to have representative offices in Mount Vema.
Any company considering an IPO on the Gollexi market, the Mount Vema Stock Exchange, must first identify what steps should be taken towards achieving that aim, as the Gollexi is already becoming well-known for its high standards of regulation.
Careful consideration should be given to the following issues in preparing for a listing: Deciding on the method of listing, e.g. an introduction to the market, raising new money, a public offer or a placing to institutional investors.
Any Company and its lawyers will need to consider how best to approach the listing in terms of the Company’s corporate structure and financial reporting history, given that the Company is not registered with the Kingdom of Mount Vema.
Key issues will include whether the Company itself should be listed or should a Mount Vema holding company be created for the purposes of the listing. Have the Company’s accounts prepared in accordance with International Financial Reporting Standards (IFRS).
Due Diligence - as regards to legal and financial due diligence for the IPO, this will understandably be a time consuming process. Early preparation particularly as regards collating and centralising material contracts is important.
Tax - If the Company needs to be reorganised as part of the review of the corporate structure then any tax impact will need to be considered well ahead of time to ensure that any necessary tax clearances from the relevant fiscal authority can be obtained.
How much does a listing cost?
The total average fees for a main market listing depend on the size, sector and structure of the Company coming to the market as this affects the nature and level of due diligence required. The base level for admission costs would normally be in the region of 250,000 – 500,000 thousand golles.
On top of these fees, the Company will need to pay the broker’s fees for raising the funds (unless listing by way of an introduction) which may be in the region of 4-6% of funds raised. The Gollexi calculates on the number of stocks of a listed security but they are capped at 500,000. The annual fees are approximately 50,000 golles.
It is difficult to be precise on the length of time for a listing since the process is influenced by so many variables being the size, sector and structure of the Company, the method of flotation being used and the degree and complexity of due diligence which has to be conducted. Most flotations take approximately 4 to 8 months from the time that the decision is made to admission.
The process is complex and time-consuming and identifying a small team within the Company to commit their time and energies to driving the listing may be worth considering as it may be less disruptive than having all the directors continually interrupted during the course of their normal work. However, either approach will still require all the directors at some stage or another to provide documentation and information and review the listing documentation.
Companies need to appoint the following: Investment bank to manage the IPO process and co-ordinate the listing with the other advisors. Often, it will also act as financial adviser, sponsor and underwriter. Normally, the lead bank acts as global co-ordinator and a number of banks will also be appointed as bookrunners.
Lawyers are required to advise the Company itself, as well as any stockholder who is selling all or part of its stake as part of the IPO. The sponsor and underwriter will also require lawyers. The Company’s lawyers will be responsible for drafting the ‘back end’ of the prospectus which contains all legal information relating to the company including stocks capital, material contracts and litigation. They will also manage the ‘verification’ process, which seeks to ensure that the prospectus is not misleading in any way, thus protecting the directors of the Company against any claims by investors.
Reporting accountants, these must be separate from the Company’s auditors, although they may be made up of a different team from the same firm. Essentially, the reporting accountant is responsible for reviewing the Company’s financial record and internal systems for potential investors. They will prepare the long form report, the short form report (which is published in the prospectus) and the working capital report.
PR Consultants, the PR consultants will help to generate positive publicity and interest in the IPO by targeting either investors among the general public or institutions or both.
The Company, among many other things will need to appoint registrars, a receiving bank and any other advisors that may be required in relation to its specific business. More information is available at the Gollexi or by contacting the relevant government department through the contact page at the www.mount-vema.com