EghtesadOnline: Tehran Stock Exchange is going through tough times.
With industries in recession and weak commodity prices, the market is bearish and trading a scarcity. Even bringing debt securities into the exchange has not helped much. The market has traded sideways so far; its benchmark is where it was at the start of the year.
Yet, with sanctions gone for almost a year now and signs of improvement in the economy, the exchange’s executives are preparing for a huge wave of initial public offerings.
Forty companies are planning to join the exchange, 37 of which will be offering shares to the public for the first time. The companies will be accepted into the exchange before the end of March, but the IPOs will take longer to complete. And these are not small troubled companies, like the ones the Iranian Privatization Organization is struggling to offload into markets this year. Some, if not all, are big names.
They include energy companies like Qadir Investment Holdings’ Electricity and Energy Investment Company, Omid Investment Bank that will be the first of its kind to go public, Homa Hotel Group that operates carrier Iran Air’s hotel chain, along with Amin Investment Bank, the largest investment bank in Iran owned by the Social Security Organization.
Meanwhile, TSE, Tehran Oil Refinery and Zangan Transformator will be moving their listing from the smaller Iran Fara Bourse to the TSE, since they now meet its requirements.
The Execution of Imam Khomeini’s Order aka EIKO, a multi-sector Iranian business organization with an estimated value of $95 billion in 2013, will offer some of its companies, including Persia Oil and Gas Development Company, Barakat Pharmaceutical Group and Internet provider Shatel, to the public on TSE.
The Iranian shareholders of mobile phone network operator Irancell, 49% owned by the South Africa-based MTN Group, have also been persuaded to go public.
However, according to Rouhollah Hosseini Moqaddam, TSE’s deputy for issuers and members, “No agreement has been reached with the company’s foreign investors. The domestic investor group has promised to set up a meeting between us and the foreigners, so we can talk and reach some sort of agreement.
The listing of these companies will diversify the exchange’s portfolio of companies and carve out a place for new groups like investment banks. Also, “the presence of new companies and industries will help attract a new group of investors to the market,” claimed Moqaddam in an interview with Tejarat-e Farda economic weekly.
The plans for the offerings are not without controversy, however. Both the fairness of how the IPOs are conducted and the appropriate use of the funds raised for the companies are under question.
The greatest obstacle barring the entry of investors into TSE is that the management of companies that go public remains in the hands of government or quasi-state organizations like EIKO, reports Financial Tribune.
“In most of the companies listed on TSE, management did not change and remained with the state and quasi-state entities,” according to market analyst, Ali Kherad. There are no signs that this trend will reverse.
Also recently, the Securities and Exchange Organization gave brokers the pick on who gets how many shares in an IPO, much to the dismay and protest of investors, saying online investors were causing market failures.
The regulatory move will allow brokers to give the bulk of shares in an IPO to their favored clients.