SiTech wants high-tech stocks at home
Call it a 10-step program for small, insecure high-tech start-ups that want to improve their lives and set their feet on stable financial ground.
The Warsaw Stock Exchange (WSE) is launching a new program, SiTech, designed to promote high-technology companies and provide them with better access to capital by helping the firms be listed on the exchange. A grouping of stocks rather than a separate trading floor, SiTech will cluster companies from the IT and telecom sectors.
"In the SiTech program, we're focusing on education and promotion because a number of (high-tech) companies don't know they can have access to capital and be listed (on the exchange)," said Leonard Furga, director of marketing and information at the WSE.
The recent flurry in IT stocks, which has largely been responsible for the WSE's robust performance since the beginning of the year, prompted the exchange to start the program. The brainchild of the WSE's management board, SiTech's major breakthrough is that it will enable high-tech companies that are not profitable, as many aren't, to list on the WSE. That breaks away from the main market's requirement that all entrants be profitable.
Although all three markets main, parallel and free have listing requirements, they all differ with regard to the book value, share capital and profitability a company must have to be listed. On the main market, a company must have generated a combined pre-tax profit of at least zl. 16 million ($4 million) for the past three years and generated a gross profit in the last financial year. The smaller parallel market simply requires companies to have generated a profit in the previous financial year. A company does not have to be profitable, however, to list on the free market, Furga said. But despite the elimination of the profitability requirements, other criteria would remain in place. Furga said the WSE already has a provision whereby the management board can waive profitability requirements for companies that show little or no profit.
"If you look at the basics of any start-up in any industry, the first couple of years are ones of investment," said Jacek Radziwilski, IT analyst at Deutsche Bank Research. "Then there's the breakeven point, and they start making money. Tech companies must put a lot of money into research and development (so) they need financing."
Furga emphasized that the main problem for new companies is their need to access public capital rather than listing requirements. "We will try to offset or lower costs for them (for going public)," he said, without providing details. One way the WSE will court high-tech firms is through partnership agreements with entities such as banks, law firms and brokerage houses involved in preparing companies to go public.
"By signing agreements, we hope to get them to offer more preferential conditions of the services they offer to companies," Furga said. "(We) are trying to identify law firms and brokerage houses that would be willing to specialize in the (high-tech) sector."
As SiTech now stands, companies included in the group will be touted in WSE publications as a new listing regardless of the market on which they are listed. Other new companies will join the listing regardless of their size. The 12 current SiTech companies include Apexim, ComArch, ComputerLand, CSS, Elzab, Optimus, Prokom, Softbank, Ster-Projekt, STGroup, Szeptel and Telekomunikacja Polska (TPSA).
The program is still in its infancy, Furga said. Within the next few weeks, the WSE plans to devise a new SiTech stock index called TechWIG, he said. The index will be published on the WSE's web site (www.gpw.com.pl or www.wse.com.pl) to enable investors to more easily track developments in high-tech sector stocks. But plans for TechWIG are still undefined since Furga said he was unsure whether all 12 current SiTech stocks or just 10 of them would comprise the index. He also said that futures contracts based on the TechWIG index were on the drawing board, but that the WSE first had to develop the methodology for the tech-based index and then draft prospectuses for the futures contracts.
On April 3, SiTech started operating a help desk and e-mail address to answer inquiries about regulations, listing procedures and obtaining listing assistance. On April 10, all 12 SiTech segment companies will start trading in the continuous trading system.
Analysts had mixed reactions about whether the program would actually aid the tech sector. They said that one motive behind the WSE's move was to stop hot companies from listing on foreign markets such as the U.S. NASDAQ or German Neuer Markt, where the listing requirements are easier.
But Radziwilski said internet companies would likely continue to look for a listing in an international market.
