Perhaps the biggest financial event for millennials this year is the listing of Snap. The concept of owning a piece of a company that is a daily part of our lives is apparently the reason why a great deal of millennials started investing in the stock market.
If the listing of a millennial-owned, millennial-driven company could lead to so many of us taking interest in the stock market, then surely the listing of more millennial-owned companies should be much sought after.
Meet Donna Nemer. She is the Director at the Johannesburg Stock Exchange (JSE) and a former Managing Director at Citi bank in New York. Donna found herself in the world of global banking when she realized that it would afford her the dream of working and travelling extensively throughout the world. We decided to tap into her well of knowledge to learn more about what it would take to get more millennial-owned businesses listed on a stock exchange.
Millennials are known to be the entrepreneurial generation. An article by Fortune has labeled us as “millennipreneurs,” as we are starting more companies, managing bigger staffs, and targeting higher profits than our baby boomer predecessors. How important is it that startup founders think about the possibility of listing their companies as they grow in profits?
The growth of small- and medium-sized (SME) businesses is crucial to the health of emerging economies, as these companies are key employers.
It is with this in mind that the stock exchanges such as the JSE created AltX. The AltX is for companies that are well established, but not yet ready to list on the JSE’s Main Board.
Given our tough economic climate, many countries are increasingly looking to SME businesses to promote growth and make a dent in the unemployment figures. However, access to financing remains a challenge that hinders expansion for many businesses, as banks are increasingly unwilling to lend to smaller businesses.
This is where a listing on AltX can be an exciting opportunity for smaller businesses to raise capital. With this said, it is important for stock exchanges to attract SMEs and market to them in the way that they need to be marketed to. We need to be speaking the same language as them, using more online and digital platforms and using faster and better technology, making it easier for them to do business with us. Access to capital markets is critical to small companies that are looking to expand their brand and grow.
We are very proud of the track record of AltX in that over a third of the companies that have listed have successfully grown and migrated onto the main board of the JSE.
When can a startup founder start considering listing their company?
The decision to list your company’s shares on a public market is a significant one. It must be based on an honest and realistic assessment of your company. A listing on the JSE improves the ability to access capital to fund acquisitions and organic growth. Local scrip or local fund raising can be used to fund the company’s expansion plans.
As your company grows and matures, listing on the JSE may be the best vehicle for your company to raise capital, improving your profile.
The minimum criteria to satisfy a listing are as follows
R2 million ($151,000)
Historical financial information on listing
Minimum of one financial year required
One full financial year required unless three year profit history is provided
% held by public shareholders
10% ( applicable on listing)
Board of Directors
Competition of the AltX Director Induction Programme (this can be done prior to or after the listing)
A listing means that the company will go public so even if a company meets the listing requirements, timing is important.
Key considerations for going public include:
Have other alternative financing sources been explored and/or exhausted?
Does your company need public financing for growth?
Is your management team experienced and balanced?
Does it include directors and senior executives with a proven track record in managing public companies
Is there a well-developed business plan that identifies potential revenue and income as well as the resources necessary to sustain growth and success?
Is your company prepared for the compliance and disclosure requirements that public companies are required to follow?
Is the market size for your company’s product or service sufficient to sustain the growth plans and expectations that will attract broad investor interest?
Is your company profitable, or has its product reached commercialization with evidence of market acceptance?
There are also other factors to consider such as transparency and costs. When it comes to ownership, the owners and founders of the company must consider how much control they want to retain. When a company goes public, a reasonable percentage of shares must be publicly owned and tradable.
Can you briefly take us through the Initial Public Offering (IPO) process.
Interact with the Primary Markets Team of the JSE
Decide where your company will feel most at home – on the main board on the smaller AltX board, which is for small to medium companies
Find a sponsor (Main Board) or a Designated Advisor (AltX)
Submit all required documents to the JSE Issuer Regulation division
Embark on a capital raising roadshow
What is the most interesting Initial Public Offering (IPO) process that you have been a part of and why?
All IPOs are different and I must confess that I have found them all exciting. To see the company CEO and executive team, together with advisors, accountants, legal advisors all together to open the market is truly exceptional. Here in South Africa we call the sound of the kudu horn and beat the African drums to announce our listings which is not just steeped in our cultural heritage but gratifying after all the hard work that goes into a listing.
That said, two recent listings stand out for me personally. One was the SA listing of AB InBev, a large multi-national company that, while acquiring SAB Miller, listed on our local market. It was one of the largest listings in JSE history and really put the high quality of our country’s capital markets in the international spotlight.
The other one would be Choppies, a Botswana based retailer that listed in SA and raised capital for its African expansions strategy, thereby demonstrating the role that the JSE can play to grow intra-African trade and investment ties and positioning SA as a regional financial center.
In your experience do first time founders usually get support from a leadership perspective when they list their companies? Especially considering the age of some startup founders, like Evan Spiegel of Snap who listed his company at only 27.
There is no question in my mind that first time founders gain enormous insight and experience when they open their companies up to public shareholders. Firstly there is the requirement for a much higher level of transparency and disclosure which go way beyond what is done when companies are in private hands.
The need to explain strategy and performance to a broad range a stakeholders requires founders to be open, honest, to really understand their business and to publicly demonstrate the duty of care that he or she has.
For some founders, this comes naturally but for others, the support from the executive team, the outside accountants, legal advisors and others are critical to their success and being able and willing to accept that support is an important character trait. There are plenty of examples of both successes and spectacular failures as far as this goes!
Lastly, what is the best advice on money that you’ve ever received and who was it from?
I’m an old fashioned investor that believes in diversification and investing in real assets, as opposed to financial assets. It’s typical of all that we learned in my generation. Time will tell if it was good advice!