Should an SGX stock quote be clearly marked as either a Catalist or mainboard listing?

THE mainboard and Catalist are the two listings boards of the Singapore Exchange (SGX) targeted at different types of companies, with differing entry and ongoing requirements.

It is important for investors to be aware of the differences between the two boards and to identify which board an issuer is listed on when making a capital allocation.

Yet, an issuer’s board may not be immediately obvious to an investor looking through stock prices or announcements on SGX’s website.

Providing multiple signals of which stocks are Catalist-listed could be beneficial for investors and the wider ecosystem.

Differences

The Catalist board was launched in November 2007 to replace the Sesdaq.

At its launch, Catalist introduced some unique features in a bid to attract fast-growing companies to list in Singapore.

First, there are no quantitative entry criteria required by SGX for a Catalist listing. The suitability of an applicant is decided upon by the full sponsor.

Sponsors also ensure Catalist-listed companies comply with their continuous listing obligations. The sponsors are answerable to SGX under Catalist rules.

By comparison, mainboard listings are meant for established enterprises. Companies that seek a mainboard listing must meet entry criteria, including minimum profit and/or market capitalisation levels.

In the year to date, eight of the 11 IPOs on SGX were Catalist companies. Just three listings were on the mainboard this year, all of them special purpose acquisition companies (Spacs).

It is useful for a light-touch regulatory regime to be available to smaller companies that need to raise capital for their growing operations with minimal burden.

Having earlier access to the public markets can elevate these companies’ profiles, and they may transfer to the mainboard when they meet the necessary quantitative requirements.

Other exchanges including Hong Kong, Malaysia, Thailand, London and New York also have junior boards for listing growth-stage companies.

Marking Catalist companies

The different requirements and regulatory regimes applicable to Catalist and mainboard companies mean, also, that investors are exposed to a different risk profile when investing in Catalist listings.

Smaller, fast-growing companies that do not have a track record can find it harder to weather storms than established players with a profitable business, for instance.

And the different regulatory approaches would produce different outcomes for investors.

Yet, questions raised by investors – occasionally in letters to The Business Times – would suggest that not all investors are fully cognisant of the different risks they take on, or the different regulatory regimes.

There may, therefore, be some benefits to treating such companies differently on the SGX website.

When checking prices on the SGX website, investors already have an option to filter companies by their board. A dedicated page for each issuer also provides this information when an investor clicks on the “view more” option.

But the SGX website goes a step further for some companies with elevated risk profiles.

Spacs and companies with a dual-class share structure, for instance, are clearly marked on the prices page with a small symbol.

There are also warning signs for companies that are watch-listed, and remarks when a company is trading cum or ex dividend.

Such indications immediately highlight a key attribute of the issuer that investors need to be aware of.

Perhaps Catalist counters could be colour-coded or carry a small symbol next to the company’s name.

Benefits for all

This suggestion isn’t meant to imply that the quality of the issuers or sponsors on the Catalist board is necessarily inferior to what is available on the mainboard.

Rather, it is to help investors be better informed about the differences between the counters.

Investors should still be expected to do their own research and study a company’s financials before eventually deciding on what might be appropriate for their own risk tolerance.

But having a clearer indication of stocks under the Catalist regime – and making the segregation between the two boards more apparent – could push investors to think more critically about the attributes of the stocks they are buying.

Over time, this may result in better outcomes for all.