With effect from 2 March 2015, issuers on the Mainboard of the Singapore Exchange Securities Trading Limited (the “SGX Mainboard”) will have to maintain a minimum trading price (“MTP”) of S$0.20 a share. Although the MTP requirement takes effect from 2 March 2015, there is no immediate impact on issuers as they have a one-year transition period ending on 1 March 2016 to comply.
The MTP is a new continuing listing requirement for all SGX Mainboard issuers, including Real Estate Investment Trusts and Business Trusts. It does not apply to Catalist-listed issuers.
Rationale for MTP requirement
The Singapore Exchange Limited (the “SGX”) is introducing the MTP to improve the overall quality of Singapore’s stock market. Higher-priced securities tend to pose less investment risk as they are less susceptible to speculation and market manipulation. Higher-priced securities also tend to have better liquidity allowing investors to execute trades at more favourable prices and lower costs.
Transition period and cure period
The SGX will begin assessing issuers for compliance with the MTP requirement 12 months from 2 March 2015, i.e. on 1 March 2016, and thereafter quarterly on the first business day of every March, June, September and December. During the initial 12-month transition period, issuers that do not comply, or are at risk of not complying, with the MTP requirement should take remedial measures to avoid being placed on the watch-list.
The SGX will place issuers that do not meet the MTP requirement at the first review date on 1 March 2016 or any of the subsequent quarterly reviews on the SGX watch-list where they are required to remain for at least six months. These issuers will have a 36-month period to exit the watch-list during which time they should take proactive steps to comply with the MTP requirement. Issuers that fail to exit the watch-list within 36 months after being placed on the watch-list will be subject to delisting.
The SGX will assess issuers based on the volume weighted average price (VWAP) of their shares for the six months preceding the date of review.
What issuers can do to comply with the MTP requirement
An issuer that does not comply, or is at risk of not complying, with the MTP requirement has the option of a few corporate actions, such as:
- share consolidation;
- acquisition of new businesses;
- a reverse takeover;
- a transfer to Catalist; or
- a combination of any of the above.
The following materials are available from the SGX website www.sgx.com: