JSX regulates stock splits and rights share issues

JAKARTA (JP): The Jakarta Stock Exchange (JSX) issued on Thursday a ruling regulating publicly listed companies' activities related to stock splits and the issuance of rights shares.

The exchange's trading director, Harry Wiguna, said under the ruling any stock split carried out by listed companies must not cause a price to drop to below Rp 500.

Many listed companies have split the nominal value of their shares to Rp 500 from Rp 1,000 in order to double the amount of their shares. The move, which theoretically cuts share prices by half, has caused the price of their shares to fall below Rp 500.

He said in the rights issue if the price was Rp 500 or below, the rights shares must be sold at its par or nominal value.

"Companies can offer their rights shares above the nominal value, as long as the price of their old shares (already traded in the market) is higher than Rp 500," he said.

Harry said there should not be any capital gain from the rights issue of companies whose share price fell below Rp 500.

Publicly listed banks would be exempted from the new regulation, Harry said, explaining that JSX was supporting the government program to restructure the country's banking sector.

Many banks have issued billions of shares with a nominal value ranging between Rp 25 and Rp 5, selling the shares at between Rp 100 to Rp 250 to boost their capital.

Harry said the restriction in the stock split and the issuance of rights shares would be lifted at the end of next June when the exchange begins a two-board trading system.

He said in the new system the exchange would have a second- tier group of companies which consisted of companies whose share price were below Rp 500.

According to JSX, for the Initial Public Offerings (IPO), the regulations are the same as for the rights issue. (udi)