A MAJOR change that kicks in next year, requiring mainboard-listed firms to have a minimum share trading price of 20 cents, has already sparked action on some corporate floors.
The new Minimum Trading Price (MTP) rule takes effect on March 1 next year. The 12-month countdown to it has begun.
The year's grace period gives firms time to get their six-month average share price above 20 cents.
The best way of doing that is through a share consolidation, which involves reducing the number of issued shares.
Once that has been done, each investor will have his stake re-calibrated to reflect the new shareholding.
While almost 250 firms of 650 mainboard-listed stocks are trading below 20 cents, only nine so far have proposed consolidations - Top Global, Uni-Asia Holdings, Aztech Group, Global Testing Corp, Hotung Investment Holdings, Captii, SP Corp, Multi-Chem and CEI Contract Manufacturing.
More consolidation applications are expected as a number of companies that tend to have their annual general meetings (AGM) in coming months would want to also hold the required extraordinary general meeting (EGM) at the same time to save costs, corporate lawyer Robson Lee said.
Property developer Top Global is starting its consolidation exercise now so it can be ready by next March when the SGX will conduct its compliance review, a company spokesman said.
The firm said it decided to seek SGX approval early for the share consolidation circular so it can run it by shareholders at an EGM to be held at the same time as its upcoming AGM.
"The share price will be based on the average trading price from Sept 1, 2015 through Feb 28, 2016," said a company spokesman.
The MTP process has a clearly defined timeline.
After the grace period ends on March 1 next year, those still below the 20-cent level will go on a watchlist for three years, during which their shares will be ineligible for investment under the Central Provident Fund (CPF) Investment Scheme.
The move is aimed at safeguarding CPF members' savings.
Companies that still fail to comply by Feb 28, 2019, could be delisted or have the option to transfer to the Catalist board, where there will be no MTP.
There are other benefits in getting the process going such as SGX waiving the fees for MTP-related share consolidations for two years.
Some firms may have to bear only legal fees.
NRA Capital executive chairman Kevin Scully noted that the decision to do a share consolidation is also driven by a company's business outlook.
Some firms may opt not to do a consolidation now as they expect robust earnings and their share price to rise above 20 cents before the rule takes effect, he said.