Malta Stock Exchange outlines measures in response to Covid-19

Published by: The WFE Focus Team May 2020

Malta may be the EU’s smallest economy but over the last five years it’s also been one of its fastest growing. The tourism sector alone makes up 15% of GDP and is one of the country’s largest employers. Although geographically Malta is half the size of Singapore, and one of the most densely populated countries in the world, it still attracted some 2.7 million tourists in 2019. So it should be no surprise that leisure and hotel companies make up a big portion of the close to 90 companies listed on the MSE.

When Covid-19 hit Malta in early March, the Malta Stock Exchange (MSE) acted quickly to take remedial action, particularly to keep our staff safe.

Although we decided to keep the MSE building open and fully operational, we needed most of our staff to work from home. Knowing that many companies listed on the Regulated Main Market and the Prospects MTF would be experiencing logistical issues, potentially causing delays to regulatory filings, we and the Regulator the Malta Financial Services Authority took immediate steps to extend reporting deadlines.

Tourism in free-fall

By the end of March, Malta was in lockdown, the airport was effectively closed and the Maltese tourism and leisure industry was in free-fall. By April, hotels, restaurants and almost all leisure venues were shut down. We felt the Malta Stock Exchange must take action to alleviate the financial stress that many of the companies listed on the MSE were experiencing.

One of our first steps was to double our payment credit policy from two months to four months. We reasoned Maltese companies, particularly those in the leisure space, would appreciate receiving extra time to manage their finances and settle invoices. However, we conceded early on that, considering so many leisure and hotel companies were effectively closed for business, that extending payments terms would afford little solace to a company experiencing an existential liquidity crunch.

Although we were very sympathetic with the plight of so many companies listed on the MSE, our Board concluded that introducing a moratorium or discounting listing fees, would not be an effective remedy. Firstly, we felt the Maltese Government was already taking significant measures to help companies to alleviate the economic pain caused by the pandemic. Considering the MSE is government owned and we are a neutral and equitable public entity, we are obliged to treat all entities equally and fairly. Thus, the prospects of lowering listing fees only for those companies most hit by the pandemic would be problematic, considering all companies would demand equal treatment and lower fees. We would have potentially been is a situation where companies with only minimal economic exposure to the pandemic, with more than enough financial resources to settle invoices, would have experienced a windfall.

Bottom line

More importantly, however, we concluded that discounting fees could weaken our balance sheet and, we believed, wouldn’t solve many companies liquidity issues, considering the hardest hit companies would still not be in a position to pay even discounted fees. Furthermore, we reasoned, the MSE is a business in its own right and we need to manage our bottom line, as well as cash flows to ensure we remain viable, liquid and able to meet our own financial obligations. A financially weak stock exchange is the last thing any country needs, particularly as a severe global recession looms.

After much analysis, we decided the best course of action would be to waive all late payment fees and create bespoke and reasonable payment plans, even extending into 2021 and beyond if necessary, to those companies hit hardest by the effects of the pandemic.

The MSE suspending a company for not paying listing fees during these very trying economic times would be viewed as insensitive and counterproductive; therefore, we concluded that amicable and reasonable solutions must be sought. We believe the hardest hit companies will genuinely appreciate being afforded flexibility and a long term payment solution, enabling them to manage their short term liquidity in a manner conducive to sustaining their businesses.

Additionally, considering the economic pain is so wide and deep for so many, I was happy to donate one month’s salary to a fund administered by the Maltese Treasury to help businesses hardest hit by the pandemic. Also, our staff voluntarily donated over 147 vacation days (capped at five days per employee), worth some €18,000, to the same fund.

We appreciate that these are just small measures, but as a stock exchange we believe we are not just stakeholders but leaders in our business community. We must act as good citizens, and show solidarity and empathy with so many experiencing such dire financial hardship.