State’s IPO on EGX expands ownership base: EGX Chairman

CAIRO - 29 December 2019: The initial public offering (IPO) of state companies on the stock Exchange has various advantages including expanding the ownership base and distributing economic growth among the largest number of individuals, Egyptian Exchange Chairman Mohamed Farid said in a seminar on Wednesday.

“Companies' income reflects on the economic growth,” Farid stated, referring that individuals can benefit from companies' growth when they are offered on the stock exchange.

“Offering state-owned companies is one of the most important steps that countries take to revitalize the stock market,” Farid stated, pointing to the Eastern European model, which has shifted from a directed economy to a free economy by stimulating the money market through offering many companies in the Stock Exchange.

Farid highlighted Egypt's experience in offering government companies on the stock exchange, both in the early 1990s with the reactivation of the stock exchange, and the issuance of Law 95 of 1992, which resulted in the revitalization of the stock market, and the second wave of government offering in 2004 and 2005.

He also referred to the latest model, which is the offering of Saudi Aramco, the largest oil producer in the world, which is a state-owned company, to stimulate trading on the Saudi Stock Exchange. “The idea of registration and offering state companies is a very important matter, which is required and will have a good return from investors in general,”Farid stressed.

Furthermore, Farid explained that offering Armed Forces' companies on EGX conveys a message that clarifies the state’s transparency and strength in dealing, the openness of the Egyptian economy and its ability to participate with all parties.

The EGX chairman said that offering on the stock exchange is related to governance;the state wanting to list its companies on the stock market means that it is ready to commit to the rules related to transparency, governance and audit committees, as well as to announce its financial statements and disclose ordinary and extraordinary matters.“This is a good message,” he asserted.

On Wednesday, President Abdel Fatah al-Sisi affirmed that Armed Forces' companies will be offered on EGX, stating that the companies will be available for all Egyptians and not just the private sector.

On the companies’ readiness to be offered on the stock exchange, Sisi said that it is up to the promoter of the IPO, the investment banks that deal in securities.

“Generally, the boom period in the market is related to the offering of government companies, and therefore we are talking about a complete idea, as the offering results in stimulating and attracting new categories of investors, and enhancing the attractiveness of the stock market,” Farid said.

Farid stressed the readiness of the EGX to accommodate new offerings, whether from Armed Forces' companies or companies listed in the government offerings program, reviewing a number of the most important measures taken by the stock market during on the supply side, including developing and improving the content of disclosure of listed companies and raising awareness of the importance of the stock market as a platform to finance companies’ expansion through developing disclosure rates and content.

"The measures also include promoting the registration of new companies on the EGX, reducing delay rates in registering capital adjustments for restricted companies, adjusting executive procedures to allow repeated stock splitting," he added.

Farid further stated that the Stock Exchange also took measures to develop the trading environment through new trading mechanisms and financial products to diversify options for investors, develop trading control mechanisms, increase the efficiency of the market,and manage the risks associated with member bodies.

“Finally, the demand side has been developed to increase the rates of communication with all local and international institutions and shed light on the most prominent efforts in the field of financial market in particular and the overall economy in general through the promotion of internal and external communication and financial inclusion. This is in addition to signing agreements with many international federations,” Farid concluded.