- Warsaw Stock Exchange changes the rules of classification of stocks in the Alert List segment
- As of 2014, all stocks trading at a price lower than PLN 0.50 will be classified in the Alert List segment irrespective of price volatility. As of Q4 2014, the penny stock threshold will be set at PLN 1.0
- Penny stock issuers will be required to adopt a corrective action plan
- Companies which fail to take effective measures in order to eliminate the conditions which classify them in the Alert List segment may face suspension of trading in their stock or even have their stock de-listed on the Exchange
Warsaw Stock Exchange made decisions which regulate the problem of penny stocks listed on the WSE Main Market by introducing solutions similar to those applied on other global exchanges. The modifications aim to gradually eliminate the problem of stocks whose price in the long term remains below a penny stock threshold and are designed to encourage listed companies to take corrective measures.
“The efforts aiming to introduce solutions which would resolve the problem of penny stocks have been taken with the participation of interested parties and with full transparency. We have looked closely at the practice applied by other global exchanges, consulted with the Equities Market Committee, and developed a solution which aims to encourage issuers to take effective measures in order to eliminate the problem of penny stocks. In the best interest of investors, we have decided to introduce the modifications gradually so as to give the issuers sufficient time to implement effective corrective measures,” said Adam Maciejewski, President of the Management Board of WSE.
The classification criterion of stocks in this segment will be the average stock price in the last three months. Just like before, classification in the Alert List segment will be performed on a quarterly basis, two trading days before the last trading day in March, June, September, and December.
The current penny stock threshold of PLN 0.50 will be maintained in the initial period of the modifications but the target threshold is PLN 1.0. It should be noted that the stock price will be the only criterion of classification of stocks in the Alert List segment. Consequently, WSE cancels the other existing condition of classification in the penny stock Alert List: high volatility of the stock price.
Under the new approach, the Alert List segment will include stocks whose average price is less than:
- PLN 0.50 – for classifications from 27 March 2014 (until the quarterly classification in September 2014 inclusive);
- PLN 1.0 – for classifications from that two trading days before the last trading day in December 2014.
Previously, the Alert List included penny stocks as well as stocks of companies in bankruptcy or in liquidation. Following the modifications, the segment will be dedicated exclusively to penny stocks.
The implications of classification of an issuer’s stocks in the Alert List remain unchanged: the issuer is removed from any index portfolio; the stock is to be traded in the single-price auction system; the issuer is given a special designation in the Exchange news service and daily bulletin (CeduĊa); the stock is removed from the list of stocks available for short selling.
An issuer whose stocks are classified in the Alert List segment for a second consecutive time, i.e., in two consecutive quarterly classifications, will be required to prepare and publish, within 30 days of the second classification, a corrective action plan indicating the measures which the issuer intends to take in order to eliminate the problem of the stock trading below the penny stock threshold. A programme aimed at raising the stock price should outline the planned measures and define their timeline.
If an issuer is classified in the Alert List segment for a sixth consecutive time, trading in its stock may be suspended for a period up to three months. After the three-month suspension period, the Exchange Management Board may decide to de-list the penny stock on the Exchange. Both in case of suspension and de-listing, the Exchange may revoke its decision if the progress of measures taken by the company in order to eliminate the penny stock problem indicates that the company will complete such measures until the next quarterly classification.
The modifications come into force on 1 January 2014 and the first periodic review and classification of companies in the Alert List segment takes place on 27 March 2014.
As an additional tool of motivating issuers to take measures necessary to eliminate the problem of penny stocks, the Exchange will charge additional quarterly fees on penny stocks as of 1 January 2015.