AMEX Launches Market for Small Firms’ Stocks
With the release of red, white and blue balloons, the American Stock Exchange opened trading Wednesday on a new market system designed expressly for companies that until now have been too small to get a listing.
AMEX’s Emerging Company Marketplace began with 22 stocks and a first-day volume of 943,000 shares.
Analysts were not sure the new market could challenge the NASDAQ over-the-counter market.
After handing out miniature American flags and chocolates at a news conference, the exchange said it hoped that the new market would create jobs and economic opportunities for the nation.
“We think we’re in a cycle where investors are looking for real value to be found in mid-sized and smaller companies,” AMEX Chairman James Jones said.
The launch was also attended by Securities and Exchange Commission Chairman Richard C. Breeden, who’s been pushing for regulatory reforms that would make it easier for small businesses to tap securities markets for capital.
Many of the nation’s nearly 20 million small businesses--which employ over half the private-sector work force--have been strapped for cash because of the credit crunch in bank lending.
Breeden said he plans to propose changes in regulations on registering securities that would allow small-business loans to be turned into shares.
Last week, the SEC proposed rules aimed at allowing small firms to cut their need for bank financing and other loans.
The heads of the companies whose shares began trading Wednesday also were on hand. Jones called the companies, which ranged from technology to medical and consumer product firms, “the companies of our future.”
In the ECM, small companies that do not meet AMEX listing requirements are allowed to trade on the exchange provided they pass a quantitative test and an evaluation by a blue-ribbon panel of Wall Street experts.
The AMEX said it expects at least another 30 companies to be listed by the end of the year.
All 22 companies whose stock started trading on the ECM Wednesday had previously traded on NASDAQ.
Jones deflected the question of rivalry with NASDAQ by saying that the inauguration of the new market struck more at the “competitive issue between the United States and the rest of the world.”
To be listed, a company must have shareholder equity of at least $1 million if it already trades on the NASDAQ. Those that do not need $2 million in equity.
A regular AMEX listing requires $4 million in shareholder equity.
Alan Ackerman, an executive vice president at Reich & Co., said it’s “too early to tell” if the marketplace will thrive. But he called the initial response encouraging.
Ackerman noted that one company that listed, Ocean Optique Distributors Inc., a distributor of eyeglass frames, had already drawn telephone queries from brokerage firms.
“Certainly, in the first few hours, interest has improved about the company,” he said.
William Graham, chairman of Advanced Photonix Inc., called the ECM listing a “stepping stone” to a regular AMEX listing. “We hope to be on the AMEX within a year,” he said.
Advanced Photonix makes light and radiation detection devices. It had $1.3 million in sales in 1991, and Graham said the company should have $3 million in revenue in the year ending April, 1992.
Keith Mullins, a managing director at Smith Barney, Harris Upham & Co. and member of the ECM blue-ribbon panel, said: “I think there is a demand by investors, both individual and institutional, for small growth stocks.”
One attraction of the ECM market is that it offers a specialist system compared to NASDAQ’s dealer-based electronic market.
“Investors will benefit from the smaller spread between the bid and ask prices,” Graham said.
