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PREPARING YOUR COMPANY FOR LISTING ON THE ESE
In many countries around the world, most owners or managers of private companies consider listing their companies on the stock exchange as a critical achievement in the life cycle of their businesses. Apart from giving companies access to low cost funding, listing on a stock exchange often indicates sound management, growth potential and sometimes prestige, among others. Despite the benefits, there are only eight (8) companies currently listed on the Eswatini Stock Exchange (ESE), the most recent being Inala Capital which was just listed on June 2019. The last listing before Inala Capital took place in 2014.
Depending on your company’s size, when you qualify, you will list on either the Main Board or the Alternative Board of the ESE. You should take time to read and understand all the listing requirements for both boards. This will help you determine which board your company would be eligible for and therefore prepare accordingly. If you fall short on some of the listing requirements for the Main Board, you can start by listing on the Alternative Board and then later graduate to the Main Board.
Selecting an institutional expert financial advisor is one of the crucial decisions you should make as you prepare your company for listing. A good financial advisor will save you money and time and will help make your company financially sound and solid with a great potential for growth. It is important to hire an institutional financial advisor as early as possible so that they help you prepare strategically and guide you through the listing process. The financial advisor typically works with other consultants such as legal advisors, accountants and tax experts, just to name a few.
During the Initial Public Offer (IPO), investors will be scrutinising almost everything about your company, from your products and services, your operations and systems, to your governance structure.
For a successful listing, it is essential to ensure that your company is well organised in terms of its operations and governance structure. For instance, make sure your record keeping, administrative and financial systems are on point so that stakeholders would easily have access to information about your company when necessary.
Make sure you have a strong management team with the necessary qualifications, skills and experience. Equally important is to ensure that your board of directors is as independent as possible and constitutes members with the right skills and experience.
A thorough valuation of your company will determine its intrinsic value which in turn will determine its IPO price. Hire an independent professional valuer who will produce a report that truly reflects the value of your company. A thorough valuation process may also unearth some areas that could be improved to increase the value of the company. Your institutional financial advisor should be able to help you find a good valuer and guide you through the process.
Similarly, have a reputable auditing firm conduct a thorough audit of your company that will uncover areas that need improvement. Normally three years of audited financial are required for listing on the ESE.
One of the first things that potential investors look at when analysing an IPO is the company’s financial reports. Investors want to invest in a company that has been, is, and will be making profits. EBITDA (earnings before interest, tax, depreciation and amortization) is one key financial element investors consider. You should ensure that your EBITDA is high enough to attract investors. This may mean, for instance, beefing up your revenue and cutting expenses through the use of efficient systems and processes.
Another financial element that you should also consider is your capital structure. Very high debt levels are unattractive to investors. You may want to restructure your capital and turn some debt into equity. Again, a good financial advisor should be able to help you do this.
You will also need to ensure that you have enough shares in issue. The minimum market capitalisation is E5,000,000 for the Main Board and E250,000 for the Alternative Board.
Most investors want to invest in a company that has potential, not only to make profits in future, but also to grow. A well-prepared report of your company’s financial prospects will definitely help a great deal during the IPO. The projections carry more weight when done and certified by a reputable professional.
Clear all outstanding issues your company has with anyone. For instance, ensure that any outstanding issues with law enforcement and regulators are resolved. You do not want negative headlines all over the news during the IPO. Key law enforcers are tax collectors, licensing authorities etc.
Advertise, advertise and advertise!!! An IPO is easily successful when the company is well known. Highlight the unique features, services and products of your company.
There has never been an opportune time to list on the Eswatini Stock Exchange (ESE) than now. Listing is one of the important ways of gaining access to low cost financing and prestige. With the help of a well knowledgeable and experienced financial advisor you can prepare your company and be ready for listing in a few months or years.
|Main Board||Alternative Board (SME)|
|Minimum Subscribed Capital||No less than 25 million shares in issue Subscribed capital of E5 million||Subscribed capital No less than E250,000|
|Minimum Profit History||Audited profit history for the preceding three years||Not Required, only projected Cash flows for the next three years|
|Minimum Free Float||20%||5%|
|Minimum Number of Public Shareholders||At least 20||At least 10|
|The Memorandum and Articles of Association of the company must comply with the Stock Exchange Listings Requirements and the Companies Act|