AMEX gets permission to list smaller companies

March 06, 1992|By Stephen Labaton | Stephen Labaton,New York Times News Service

WASHINGTON -- The Securities and Exchange Commission gave the American Stock Exchange permission yesterday to list smaller, younger and more speculative companies that now trade in the over-the-counter market.

The immediate effect of yesterday's action will be to increase competition among the exchanges for smaller companies. For the American exchange, which recently began to reverse a steady erosion of its market share, the decision holds out the hope of new profits, if investors become interested in the new junior tier of stocks.

But some experts worry that for the small investor, the decision presents the risk of involvement in less stable companies, although executives at the American exchange say they are taking steps to protect the unwary.

Richard C. Breeden, chairman of the commission, said the decision was primarily intended to provide more options for smaller companies to raise money and was part of a grander plan intended to make it cheaper for emerging businesses to issue stock.

"Small businesses cannot raise money unless there's a strong, secondary market thereafter," Mr. Breeden said.

Picking up the White House's re-election agenda, Mr. Breeden is proposing to deregulate the marketplace by reducing and in some cases eliminating the public disclosure requirements for small companies and also by making it easier for mutual funds to invest in them.

The smaller companies now eligible to be listed on the American exchange will be exempt from many of the requirements for other listed companies, which must give shareholders the right to elect directors and pass judgment on proposed mergers and acquisitions.

The other measures are expected to be formally offered for public comment by the commission next week.

The smaller companies on the Amex will be identified next week and begin trading on March 18. They will be listed under a second tier that the exchange has dubbed the "emerging company market place." To identify them to investors, their ticker symbol will include the suffix ".ec".

Officials at the Amex said between 15 and 20 companies will be on the list, which is expected to grow to about 50 by year's end.

The newly listed Amex companies must have assets of at least $2 million if they come from the over-the-counter market, $4 million otherwise. They will be required to have a market value of at least $2.5 million.

They will also need to have issued at least 250,000 shares held by a minimum of 300 shareholders. If they come from the over-the-counter market, then their stock price cannot fall below $1; otherwise the floor is $3.

Companies already listed on the American exchange must have a market value of at least $3 million and must have 500,000 shares held by at least 800 shareholders.

Their stock cannot fall below $3, and their pretax earnings for two of the last three years must be at least $750,000.

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