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Wednesday, 20 November 2019

Resuming IPOs?

A new batch of shares in public-sector companies may soon be up for grabs, reports Safeya Mounir

Safeya Mounir , Saturday 28 Sep 2019
Resuming IPOs?
Abu Qir Fertilisers Company
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Additional shares in the Abu Qir Fertilisers Company or the Alexandria Container and Cargo Handling Company are expected to be offered on the stock exchange by the government in the coming two weeks.

The offering, announced by Minister of Public Enterprise Hisham Tawfik, will be part of the government’s programme to sell stakes in state-owned companies.

Although 2019 was supposed to see initial public offerings (IPOs) take place in a good number of state-owned companies, this has not taken place. Instead, the government has decided to put off the IPOs until January 2020 due to procedures taking a longer time than scheduled.

The IPOs will include eight mining and industrial companies, in addition to E-Finance and the Banque du Caire.

The government had announced last year that it would put up 23 companies and banks for public subscription. However, so far only 4.7 per cent of Eastern Tobacco was offered on the stock market earlier this year.

After the IPOs programme was postponed, Tawfik announced that additional shares in the Abu Qir Fertilisers Company and the Alexandria Container and Cargo Handling Company could soon be offered.

According to the budget for fiscal year 2019-20, the government is targeting LE10 billion in revenues from IPOs this year.

The IPOs are meant to get a feel for the market, said Mona Mustafa, head of research at Arabiya Online. The companies announced needed no promotional campaigns since they were already being traded on the bourse, she added.

Earlier statements by the minister of public enterprise revealed that the decision to offer shares on the stock market would be taken after consulting with the investment bank responsible for the IPO to decide on the percentages of the shares offered to institutions, individuals, and in a public offering. The decision to go ahead with the IPO would also be based on the liquidity available in the market and the conditions of the financial markets.

Mustafa said it would be better to offer shares in new companies to attract a new stratum of investors. Offering shares in Banque du Cairo, as earlier planned in the IPO programme, or E-Finance, the company that builds, runs, and operates the network of Egyptian government electronic payments and collections, will attract new investors and pour additional money into the stock market, she suggested.

Companies from the mining sector such as the ASEC Company for Mining could attract more capital and foreign investors, she added.

Amr Al-Alfi, an analyst at CI Capital, said the time had been suitable for the past few weeks for an IPO, citing the success of the offering of Fawry, an e-solutions payment company, as proof. However, with the sharp losses on the stock exchange this week, it was not clear how things will progress, he said. The EGX30 Index, which includes the Egyptian stock market’s most traded shares, closed 5.3 per cent down on Sunday, its lowest in three years, following minor protests over the weekend.

Al-Alfi does not support offering shares in companies already active in the stock market. It was important to offer shares in new companies, such as Banque du Cairo and the Sidi Kerir Petrochemicals Company (SIDPEC), he said.

New products would attract new investors, Al-Alfi stated, adding that the IPOs had to have a target beyond the sale alone, such as an investor wanting to restructure the company or increase its capital.

Offering shares in Banque du Cairo would create a competitor to the Commercial International Bank, currently the only bank in the EGX 30.

The government is more inclined to offer shares in companies already operating in the stock market because they are easier to offer, Al-Alfi said. But he believed it unlikely that a new foreign investor would buy into companies already operating in the market.

 

*A version of this article appears in print in the 26 September, 2019 edition of Al-Ahram Weekly

 

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