After more than seven months since the beginning of the year and the public offering of only two companies at the stock exchange, one of which has taken place during the second half of the year, Mr. Hassan Ghalibaf Asl who is the CEO of the Tehran stock Exchange has announced the offering of the shares of 40 new companies in the second half of the current year.
The main objective of the Tehran Stock Exchange Company has been primarily gathering liquidity from its own investors and allocating them to the efficient cycle of production so that every investor will be able to recognize profitable companies and, while collaborating to the economic progress of the country, can at the same time gain an appropriate return from its own capital. A brief study of the companies admitted at the stock exchange, shows that the profitability of the majority of these companies is strongly dependent upon the price of globally traded commodities including oil, petrochemical products and base metals. Therefore, considering the volatility of prices of these products at the global markets, profitability of these companies can be strongly affected. As a result, taking into account the existing lack of diversity of investment opportunities at the stock market, a group of investors will disregard investing in this market. This is while the share of commodity oriented companies at the financial markets of the developed countries is considerably lower than the domestic capital market. On the other hand, largest companies admitted at the United Sates Stock Exchange from the point of view of market value, are companies that are active in the information technology industry and lately we have witnessed an increase in the number of companies active in this industry within our country with the public offering of the shares of the Dadeh Pardazi Company and Asan Pardakht Persian. The offering of the companies active in this industry as well as Tourism and the like, which eventually leads to gaining the trust of investors to the stock exchange, can be an excellent option for investment.
According to the latest announcement by the CEO of the Tehran Stock Exchange Company, future offerings at the stock exchange can be divided to the following general groups:
- Transferring the symbols of companies that were being traded in the past at the Farabourse market to the stock exchange. By the time this article is being published, the symbols of a few companies, namely Transformator Tozi Zangan, palayesh Naft Tehran, and Tehran Bourse will be registered at the Stock exchange and in a near future there is a high chance that we witness the registration of two other companies at the stock exchange: Hamkaran System company and Gostaresh Tejarat va Sarmayeh Iranian company. Bearing in mind that the symbols of these types of companies have been traded in the past, we cannot consider them as initial public offerings; however, the further emphasis of the stock exchange on more transparency from these companies can eventually lead to higher trust on behalf of investors and reduced risk of non-transparency in the above mentioned companies.
- Investment funds and fixed income securities. Since Tehran Stock Exchange has long term planning specifically regarding debt securities, therefore in addition to the previous trend it has also the objective to underwrite 5000 billion Rials worth of Morabehah securities of SAIPA Company, as well as continuing the publishing the Islamic treasury documents within the second half of the current year. On the other hand, we can name other measures in line with developing the market for fixed income financial instruments at the stock exchange, namely the underwriting of the Avishan real estate Fund, Tehran Municipality government bonds and Amin Financing fixed income tradable fund.
- Other companies are also supposed to be listed in TSE and have their initial public offering at the stock exchange in the near future. Companies active in the IT field such as Irancell as one of the largest mobile phone operators and companies like Asia Tec and Shatel which can be named as the most pioneer providers of access to internet services and communication methods in the country are under negotiations to be listed at the stock exchange, all promising an expansion in the share of IT industry in the stock market. On the other hand, Sina Financial and Investment Holding, as one the country’s largest financial holdings, is in line to be registered at the stock exchange and considering the ownership of companies like Sina Bank and Insurance, it can be quite attractive for investors. Moreover, shares of Omid investment bank, as the first investment bank that is listed at the stock exchange, is supposed to be registered at the stock market board. According to the CEO of Tehran Stock Exchange, the country’s power industry will probably be part of initial offerings during the rest of the year, and Jahrom power plant, Pasargad Electrical Energy, and Al-Gghadir Electricity and Energy Investment are companies that are in line to be registered at the stock exchange. A new industry is also waiting is also waiting for its symbol to be registered at the stock exchange; Homa chain hotels in the hotel management industry will enter the stock exchange and such measure can pave the way for other hotels to enter the stock market as well. This industry, considering the lifting of sanctions and the entrance of more foreign tourists to the country will be able to eliminate its shortcomings through financing from the stock exchange. At the end, it seems that the largest company that will have an initial offering is the National Iranian Tanker Company.
Initial offering of companies at the stock exchange, besides its advantages mentioned above, entails some risks as well. Lack of long-term historical record of the companies leads to lack of transparency required for investing in these companies for the first time. Scenarios can be considered instead, some of which can lead to investment loss for investors. In this regard, we can mention Khuzestan cement Company, Mahtab Khanouj Electricity Production Company, Damavand Electricity Production and Dana Insurance. These companies, due to their unfair prices at their initial public offering, were reduced to a much lower price in a very short period, in turn resulting in loss for those investors who have opted for such shares without any clear policy and planning.
Taking into account the above mentioned advantages and disadvantages, we can state that the higher the collaboration of the private sector, the more we can be hopeful for the future economic growth, which will be realized with the help of a more prosperous and deeper stock exchange system. However, the most important obstacle facing investors for collaborating in the field is the problem of non-transferring the management to the private sector. In most companies that are listed in the securities and stock exchange, no change in the structure of management has occurred and their governmental or quasi governmental management is still stable. If we assume that these companies in providing their financing needs have offered their shares at the stock exchange, therefore expecting them to invest what they gained from this financing at a rate higher than risk-free interest rate is not unreasonable and exorbitant. Something we do not see in many large companies in the stock market. A point that has been recurring in the Iranian capital market is that many companies use financing via the securities and exchange market as a method to escape from their own financial straits. In fact we can compare and liken these companies to a swamp that swallows investors capital and do not yield them a suitable return. Now considering the change in the attitude and trend in most companies after the elimination of sanctions and their tendency and willingness to collaborate with foreign investors, these companies tend to increase their rate of return by taking out their non-productive assets from their balance sheets. The result of such measure is that the market that has been previously influenced by rumors and news will gradually become dominated and influenced by fundamental variables and will eventually lead to higher trust on behalf of investors. If this factor is accompanied by offering of more companies to the stock exchange we can be hopeful for the future of the Iranian delicate capital market. A capital market that has the ultimate objective of helping those investors that cannot establish a new company based on their own capital. This fact will in the first place help the growth and prosperity of the company and will eventually lead to faster growing and more prosperous economy and a real increase in the country’s gross domestic product and in this case we can compare the country’s stock exchange as its economy’s thermometer.