Don't let Catalist become a graveyard for dying companies

WHEN stock exchanges introduce a second board, it is often targeted at attracting companies with nil or limited profit records but with growth potential. The acronyms used reflect the exchanges' optimism or aspirations about these companies, such as Catalist in Singapore, AIM (Alternative Investment Market) in the United Kingdom, and GEM (Growth Enterprise Market) in Hong Kong. Unfortunately, companies aiming to be catalysed into gems through access to public capital may not fulfil their promise.

When the Singapore Exchange (SGX) overhauled Sesdaq in 2007 and introduced Catalist, the hope must have been that many of these Catalist companies would fulfil their growth potential and get upgraded to the Mainboard. Although some companies have indeed moved up, we now have the situation of companies being advised by SGX to consider transferring from the Mainboard to Catalist if they are unable to meet the Minimum Trading Price (MTP) requirement.

It is likely that many companies which are unable to meet the MTP requirement suffer from poor business fundamentals that threaten their long-term viability. We may also have a situation of companies with recurring losses seeking to transfer to Catalist when they are on the verge of being placed on the Watchlist.