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Company Law B > Listing requirements on the JSE > Flashcards

Listing requirements on the JSE Flashcards

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1
Q

What is equity in company law?

A

Equity refers to ownership or stake in a company, which is represented by shares. Equity holders, or shareholders, own part of the company and have claims on the company’s earnings and assets.

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2
Q

What is equity in business?

A

The value of a business after deducting liabilities from assets. It is the total amount of money that would be returned to shareholders if debt is paid off and assets liquidated.

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3
Q

What are derivatives?

A

A derivative is a financial contract whose value is based on the performance of an underlying asset, such as a stock, bond, commodity, or currency, and its price is influenced by changes in the value of the underlying asset.

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4
Q

What are bonds?

A

A bond is a fixed-income investment that represents a loan made by an investor to a borrower, typically corporate or governmental.

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5
Q

What is a unit trust?

A

A unit trust is a collective investment scheme that pools money from various investors to invest in a diversified portfolio of assets, such as equities, bonds, or other securities.

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6
Q

What types of derivatives are there?

A

Futures, options swaps.

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7
Q

What is the investment purpose of a unit trust?

A

Unit trusts allow investors to gain exposure to a diversified portfolio with lower risk than investing in individual securities. They are particularly popular among individual investors who want access to equity and bond markets without directly managing a portfolio.

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8
Q

What are derivatives used for?

A

Hedging (reducing risk) and speculation (to bet on price movements).

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9
Q

What is a future contract?

A

Contracts to buy or sell an asset at a predetermined price at a future date.

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10
Q

What is an option?

A

Contract that gives the holder the right, but not the obligation, to buy (call option) or sell (put option) an asset at a specific price before a certain date.

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11
Q

What is a swap?

A

An agreement between two parties to exchange cash flows or other financial instruments, often used to manage interest rate or currency exchange risk.

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12
Q

What is listing?

A

The process by which a company’s shares are made available for public trading on a stock exchange, such as the Johannesburg Stock Exchange (JSE) in South Africa. When a company lists its shares, it transitions from being a private company (with shares owned by a small group of investors) to a public company (with shares that can be bought and sold by the general public).

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13
Q

What are the advantages of listing?

A
  1. Access to capital
  2. Improved liquidity
  3. Enhanced public profile and credibility
  4. Employee incentives
  5. Market valuation
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14
Q

What are the disadvantages of listing?

A
  1. Cost of listing and compliance is expensive
  2. Loss of control
  3. Increased regulatory scrutiny
  4. Market volatility
  5. Takeover risks
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15
Q

What can be listed?

A

Securities and equities, derivatives and bonds on the JSE since the JSE’s takeover of the Bond Exchange.

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16
Q

What is the JSE listing process?

A
  1. Corporate restructuring if company is private
  2. Appointment of professional advisors
  3. Financial preparation
  4. Drafting the prospectus
  5. Submission to the JSE
  6. Approval and marketing the IPO
  7. Pricing and allocation
  8. Listing day
17
Q

What are the types of listings?

A
  1. Primary- When a company lists its shares on its home exchange
  2. Secondary- When a company already listed on one stock exchange lists its shares on another stock exchange to access more markets.
17
Q

Who are the professional advisors in the listing process?

A
  1. Sponsor (mandatory)
  2. Corporate advisor
  3. Legal advisor
18
Q

What is the role of the sponsor?

A

1.Advise the company on its application for listing, guide the company through the listing process
2. Ensure company meets all the requirements set out in the listing requirements
3. Liaise between the JSE and the company during the listing process
4. Submit all the documentation to the JSE on the company’s behalf.

19
Q

What is the role of the corporate advisor?

A
  1. Advise the listing company on the timing, size and pricing of its share offer
  2. Works with the legal advisors in drafting the listing documentation
  3. Markets the share offer to the investment community
  4. If the shares are to be introduced to the market via a placing, arranges the placing
  5. If the shares are to be introduced via a public offer, the corporate advisor will either underwrite the offer itself, or arrange for one or more banks to underwrite it
20
Q

What is the role of the legal advisor?

A

1.Draft all the listing documentation which must comply with the listing requirements
2. Drafts all the ancillary contracts
3.

21
Q

What is section 5 of the JSE listing requirements?

A

Methods and procedures of bringing securities to listing

22
Q

What are the 3 main methods by which a company which has never listed its securities can obtain a listing?

A
  1. Introduction (direct listing)
  2. Placing
  3. Public offer
23
Q

What is an introduction?

A

Introduction is a method of listing where a company’s shares are listed on the JSE without the need for a public offering of new or existing shares. This typically occurs when a company already has a large number of shareholders and sufficient public interest, but its shares are not yet publicly traded on the JSE.

24
Q

What is the benefit of an introduction?

A

minimal formalities required.

25
Q

What is a placing?

A

A placing is a method where a company issues new shares or sells existing shares, but instead of offering them to the general public, it places them directly with a select group of institutional investors

26
Q

What are the benefits of a placing?

A
  1. Price flexibility
  2. Quick and efficient
  3. Less Disclosure
  4. Speedy fundraising.
27
Q

What are the forms a placing can take?

A
  1. Offer for sale (existing SH sell shares, no new cash raised)
  2. Offer for subscription (company raises cash by issuing new shares and selling them)
  3. Combination of both
28
Q

How can compliance costs be saved with a placing?

A

Ensure that the placing does not fall within the definition of a public offer.

29
Q

What is an IPO?

A

In this process, a company offers its shares to the general public for the first time through the stock exchange.

30
Q

What is a free float?

A

The company must have a minimum percentage of shares available for public trading.

31
Q

For which companies is an introduction suitable?

A
  1. Companies with a wide shareholder base but no formal market for trading shares.
  2. Companies already listed on another exchange, seeking a secondary listing.
32
Q

For which companies is a placing suitable?

A
  1. Companies looking for speedy fundraising with fewer regulatory requirements.
  2. Firms that have strong relationships with institutional investors or need to raise capital quickly and with less market risk.
33
Q

For which companies is a public offer suitable?

A
  1. Companies looking to raise significant capital from a broad investor base, including retail investors.
  2. Firms aiming to increase public visibility and access to a larger pool of investors.
34
Q

What are the 3 categories of continuing obligations which must be observed by all listed companies?

A
  1. Price sensitive information
  2. Trading statements
  3. Corporate governance.
35
Q

What is the continuing obligation relating to price sensitive information?

A

Unless the information is confidential, companies must release information which may have a material effect on investors’ decisions without delay.

36
Q

What form will this release of price sensitive information take?

A

A cautionary announcement on the Stock Exchange News Services.

37
Q

What does the issue of a cautionary announcement do?

A

It triggers a closed period for dealing in shares by directors.

Company Law B (7 decks)

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