KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has approved a framework for ‘Direct Listing’ of companies at the Pakistan Stock Exchange (PSX).
Securities and Exchange Commission of Pakistan (SECP) in a statement on Friday said that the move will further simplify the listing of companies at the PSX. It informed that any public limited company having a minimum paid-up capital of Rs200 million and audited annual accounts for two preceding years can apply for the direct listing.
The SECP said that the framework, finalized after thorough consultation with the PSX and other stakeholders, will be part of the stock exchange’s rule book.
“In continuation of its efforts for an enabling eco-system to improve capital formation in the country, SECP has approved framework for Direct Listing of companies at PSX,” said the statement.
“Direct listing, unlike conventional offerings, is a process whereby a company can get listed on the stock exchange by selling existing shares to accredited investors, existing shareholders, and specific category of investors, without the mandatory appointment of intermediaries, the statement elaborated.
Presently, a company that intends to go public has to involve an investment bank that helps determine the company value and advises on an opening share price, the market regulator. The process includes hiring financial advisors, conducting roadshows to develop public interest, and then incurring fees for all the services at each step of the listing process.
An additional requirement could be underwriting, which involves a guarantee by the investment bank that it will buy the shares itself if they are left unsold at the end of the listing process. However, the SECP’s initiative looks to curtail the role of intermediaries, potentially reducing the cost of pre-listing. Market followers, however, say this will pose new challenges as well.
Last month, the SECP introduced the concept of ‘direct listing’ of companies. “Direct listing is a concept which is there in developed markets already,” SECP Chairman Aamir Khan had said. “It’s something on our internal drawing board right now.”
Later, the SECP stated that the objective is to facilitate the listing of companies, especially State-Owned Enterprises (SOEs), and to promote a culture of good governance among the corporate sector.
