End of the road for new listings via introductions

In a fresh policy u-turn of sorts but welcomed by many the Securities and Exchange Commission (SEC) has done away with listing by companies via introductions which was very popular last year.

A few years back to broaden the stock market the SEC permitted listing by introductions and this policy resulted in 16 equity introductions last year in addition to two in the debt category. 

The number superseded the new listings via Initial Public Offering which was 13. In 2010 there were only two equity introductions.

However apparently due to criticism over how share prices of some of the companies have ballooned since introduction and the lack of real opportunity for a credible price discovery of some of these listings, the SEC has decided to call it quits for this mode of expansion in the number of companies on the Colombo Stock Exchange.

The window of listing via introductions helped several finance companies to list as required by the Central Bank.

Amending previous directives, the SEC said with effect from 1 April 2012, there will be no provisions relating to listing of equity by way of an introduction. However those applications received or approved on or before 31 March 2012 will be allowed to go through. The new move has been welcomed by the majority of the capital market stakeholders whilst others found fault over yet another policy reversal. They argued that if there were short comings, the process and requirements for listing via introductions could have been improved rather than simply shutting down this opportunity for smaller companies.

In its announcement, the SEC didn’t give reasons for the new move.