No ‘junk’: How the Sydney Stock Exchange plans to reinvent itself

The Sydney Stock Exchange (SSX) is getting a makeover in a bid to reposition it as a top secondary exchange contender and leave behind its less successful history.

Like the ASX, the SSX is an ASIC-regulated tier one stock exchange. The exchange first opened in 1997 as the Australian property exempt market before receiving a stock exchange licence in August 2004.

However, the SSX in the past predominantly listed Chinese companies and barely rated a mention among potential Australian listees looking for an exchange on home soil.

But the SSX is now entering a new era, with new management staunchly focused on proving the exchange is indeed a ‘True Blue’ Aussie.

“When I first went to the regulator, they said … ‘look we’re worried that you guys might be, as with some of the smaller guys, so desperate to win business that you just start listing junk’,” newly appointed CEO Michael Goh told Stockhead.

“And I said, ‘my reputation and the reputation of my team and the organisation are too valuable, that won’t happen’.”

Goh said so far, the SSX had rejected seven applicants, one valued at over $100m.

“You look at it and go ‘gee I wish they were good enough’ because that’s money in the can, right? I know they may have walked down the road and had better luck, but we can’t do that because we know that in possibly six months or even a year, they’re going to be suspended or delisted,” he explained.

“One of the important things is to diametrically change the strategy.

“It’s important for us to say: ‘right we’re going to be a tier one stock exchange in Australia that focuses on building Australia and the Australian economy and supporting Australian companies, but we will take foreign investors and good quality companies.”

Goh and his team are aiming for 20 listings by the end of this year.

“If we got to $500m market cap or above, fantastic,” he said. “They’re credible numbers and stretch enough for us to achieve based on not spreading ourselves too thinly and really looking after our customers.”

The current pipeline of potential listees is 70 per cent Aussie with the rest split between Singapore, Malaysia and Hong Kong.

 

Less costly, not as many hurdles

Private gold explorer Torque Metals will be the first resources player to list on the SSX. The company previously tried to list on the ASX in late 2018 but was unsuccessful.

China Magnesium Corporation (ASX:CMC), meanwhile, is dumping the ASX in favour of the SSX.

The company has been suspended from Australia’s main bourse under listing rule 17.3 since July last year.

The clincher for both companies choosing the SSX over alternative exchanges has been the lower compliance costs, lower entry cost and good liquidity.

Australian incorporated and Melbourne-headquartered West Coast Aquaculture Group is also on the SSX’s “upcoming floats” list.

Torque has now received its listing date and will be lighting up the boards on Tuesday August 4 under the ticker ‘8TM’.

The SSX is affiliated with London-headquartered CMC Markets, the second biggest trading platform in the world.

The exchange also utilises the ANZ Share Trading platform, including E*TRADE.

“The SSX actually has some 550,000 investors that will be looking at and trading your stock,” Torque Metals managing director Ian Finch told Stockhead previously.

Junior companies also only have to commit to a minimum listing price of 5c per share, which provides investors with greater leverage to the upside compared to the ASX’s 20c listing price requirement.

The SSX is also aiming to list companies much quicker than the ASX does.

“We offer to list companies between four and six weeks rather than, for example, 18 months to two years, which of course is a much better proposition when you’re talking to lawyers and corporate advisors and the like,” Goh said.

“Most of them know they have to pay a success fee, but the cost to get in there can sometimes be more than what they’re going to raise in capital when they float.”

 

ESG a key focus

Socially and environmentally conscious investments have become a pretty big focus for investors in recent times.

Stats show investors are pumping billions into environmental, social and governance (ESG) investments.

ESG is also top of the SSX’s agenda as well, with the exchange appointing an ESG board.

“I was talking to some guys that I used to work with many years ago who are now running funds, and part of their mandate now, assigned by their chief investment officer or their board, is ‘X’ per cent of funds must be in ESG,” Goh explained.

“And they go ‘where the heck can we buy it locally’? They said, ‘if you start listing ESG firms on your board and if you can create an index at some point, we’re there’. So one of the target sectors for us is ESG.”

Antony Tolfts, director – market supervision and listing compliance for the SSX, told Stockhead many of the miners in particular did not realise they had the opportunity to potentially list in the ESG category.

“We’ve got some really interesting companies in our pipeline who are listing to expand their operations, where they take waste and recycle it into different things,” he explained.

“And obviously … it’s not just environmentalism, that is part of the process, but it is looking at equality in the workforce and good governance, which is something that the SSX really can help with.

“The companies we’re listing, whether tech or mining or property, they can be listed in that category, but they can also have an overlying ESG wrapper as it were.

“So they’re in their sectors as normal but equally they’ve got an ESG tag attached to them, so that firms that are looking to invest in the ESG space can target those companies specifically.”

 

Crypto not out of the game

The ASX has made it difficult for cryptocurrency linked companies to keep trading on the main bourse or get listed in the first place, but the SSX is not immediately shutting the doors on any potential applicants.

“Irrespective of industry sector, the SSX is in the business of listing suitable companies through efficient, supportive and best in class governance listing rules which support growth companies to reach their potential,” Tolfts told Stockhead earlier in July.

“The SSX gives prospective companies, from all industry sectors, a ‘fair go’ to provide an efficient path to market for qualifying growth companies.

“Companies operating within the digital and crypto space would receive an objective review with the same due diligence and evaluation under the listing rules as any other company looking to list or already listed.”

The post No ‘junk’: How the Sydney Stock Exchange plans to reinvent itself appeared first on Stockhead.

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