AT Brokerage, the company responsible for promoting the initial public offering (IPO) of AT Lease in the Egyptian Exchange (EGX), has succeeded in attracting financial institutions and Arab investors with high financial solvency in the five additional days EGX approved to be added to the period of receiving purchase orders in the IPO, managing director of the brokerage firm Mohammed Fathallah said.
According to an official source at EGX, purchase orders of 7.812m stocks have been received in the IPO at EGX’s Over the Counter (OTC) market as of the end of last Thursday’s session. This is equal to 97.65% of the total stocks offered, which amount to 8m stocks, equal to 10% of the company’s stocks, at a price of EGP 5.05 per stock.
Subscription for the IPO is anticipated to be closed on Monday.
Small and medium IPOs face difficulties in being promoted because the more significant IPOs withdraw the liquidity from the market, the official said.
Each IPO has specific features that are suitable for a segment of shareholders, the source said. For example, the IPO of MB for Engineering at Nile Stock Exchange (Nilex) for small- and medium-sized enterprises has been covered 29 times.
Fathallah said that the company has succeeded in attracting institutions after the announcement of the results of the first quarter on 9 May. The institutions made participating in the IPO subject to having access to the most recent earnings report.
Adding five days to the period of the IPO was absolutely necessary, because the company failed to cover it during the first period of receiving the purchase orders from 3 May until 9 May, as local investors were just returning from their holiday period.
The earnings report of AT Lease during the first quarter of this year showed that the company has achieved a net profit of EGP 12.089m, compared to EGP 6.532m in the same period last year, a growth rate of 85%.
Fathallah said that some investors expressed concern over the possibility of registering a decline in the performance of the stock after the IPO and that the stock would take some time to benefit from the margin trading feature. However, the company made it clear to them that the purpose of the IPO in stocks is investment, not a quick exit.
Margin trading is one of the features available for stocks with good liquidity. It gives the shareholders the right to obtain financing from brokerages to buy them in exchange for financial guarantees or stocks, which gives the opportunity to the shareholders to increase the size of the securities portfolio.
No account was created to support maintaining the stock price at the price of the IPO, due to the fact that the IPO is average sized and so does not require this step, Fathallah said. In addition, the declared aim of subscribing to the IPO is to invest for a period of at least six months, rather than speculation.
Commenting on the concern over conflict of interest, as AT Brokerage is offering its sister company AT Lease, Fathallah said that there is an independent financial adviser who conducted the fair value report. The company acting as the IPO manager signals to investors that they are confident that it is a good IPO.
The paid-up capital of AT Leasing amounts to EGP 200m, divided into 80m stocks, with a nominal value of EGP 2.5 per stock.