By Mohamed Ayyad
Consultations are underway with a number of governmental companies to increase their capital in the market in an effort to boost trade volume amid the recent exit of several major companies, according to Egyptian Exchange (EGX) Chairman Mohamed Omran.
Omran told the Daily News Egypt that the agreement is still underway to increase the capital of these companies or issue shares that would allow them to expand their funding while supporting the slowing economy.
Stock market officials are seeking to compensate for the exit of a number of companies from the market, after Vodafone Telecommunications Company delisted from the stock exchange in the middle of 2007. The Vodafone departure led to deals for the acquisition of Mobinil by France Telecom, and Ahli Bank Société Générale by Qatar National Bank (QNB Group) and Orascom Construction Industries. This in turn led to Dutch Company OCI NV decreasing its share holdings in these companies, which was followed by their de-listing from the primary stock indices.
The market has not seen any new offerings since Amer Group and Juhayna Foods made an offering in 2010.
Initial public offerings (IPOs) contribute to pumping new liquidity in the market through new shareholders, raising low levels of trading, and providing funding for new projects that contribute to increasing operating compacity, and raising otherwise slow economic growth rates that have come about due to the negative repercussions of political and economic stability since 2011.
Sources close to the consultations said that among the targeted companies is the government-owned Arab Contracting Company. Such a move would help the company fund its projects. Dar Al-Fuad Company was also mentioned in connection with the talks. Sources did not reveal whether final agreement has been reached on the mechanisms for the offering or its timing.
The source continued by noting that a meeting was held between the stock market chairman and Prime Minister Ibrahim Mehleb during which the two discussed the possibility of an additional capital offering for the Arab Contracting Company in order to fund its projects. The prime minister is the former head of the Arab Contracting Company.
Stock market regulations governing listings stipulate that offerings be no less than 10% of the total traded company shares following the IPO.
Stock market officials are struggling to attract new investors to a market that suffers from a shortage of liquidity as well as foreign and Egyptian investor fears. The prospect of injecting new capital into the market comes in light of political and economic uncertainty that has plagued the country since the 2011 revolution.
Osama Saleh, the former investment minister, believes that stock market officials must focus on bringing forward IPOs for companies that are joining the stock market for the first time, citing the example of founding a company through an IPO, and without foreigner investors, in order to fund a project for the Suez Canal Hub.
Saleh added that focus needs to be placed on making the stock market a means by which to fund development and infrastructure projects in the areas of energy, alternative energy, transportation and heavy industries. It should also support all government efforts to achieve positive growth rates.
News reports noted that the stock market chairmen held talks with Domty Company for Foods Production to discuss steps for offering its shares on the market, and to fund expansions that would inject EGP 25m into the market over the current year. In a press statement, Mohamed al-Abar, head of Emirati Properties, suggested an intention to list shares of Egypt Property for Development on the stock market.
Sharif Sami, head of the financial oversight body, sees IPOs of governmental companies on the stock market as a good idea that will offer a different source of funding from bank loans. Sami noted that the recent state of optimism in the economy will encourage the government and companies in the private sector to offer shares and list themselves on the stock market.
Sami pledged success for this move in promoting the stock market and its role in financing growth, affirming that the coming period will be accompanied by major efforts across the governorates to promote and spread the culture of investing in the stock market.
For more on the IPOs conference coverage, please check:
First IPOs summit sheds light on companies’ listings in stock market
Consultations underway with public companies to increase capital, boost trading: EGX chairman
Petroleum ministry prepares bourse listing of new petrochemicals companies
Current conditions unfavourable to head the stock exchange: Tourism companies
State owned companies’ IPOs: Disguised privatisation or economic solution?