Government Announces First Companies to Go for People’s IPO in 2012

Aug 26. MFA

Government Announces First Companies to Go for People’s IPO in 2012Kazakhstan is set to start floating shares of several national companies under the “People’s IPO” programme in the second or third quarter of 2012, Minister of Economic Development and Trade Kairat Kelimbetov announced on August 23 at the government session.

The Government announced the list of state-owned companies whose shares will become available first. Among them are JSC “KazTransOil” (operator of oil pipelines) and JSC “KEGOC” (national electricity grid operator) as they were determined the most prepared ones for floating. The shares in these companies will be floated in the Q2 and Q3 of 2012. Besides, the JSC “Air Astana” (flagship airline) is likely to be in the list as well.

According to the Economy Ministry’s data, the second wave of floatation will follow in 2013 and will include the state-owned gas transportation company, KazTransGas, the maritime shipping company, Kazmortransflot, and Samruk-Energo, the state-owned power generation company.

The shares in JSC “Kazakhstan Temir Zholy” and JSC “Kaztemirtrans” will be placed on the stock market in 2014-15.

“The studies show that people’s current demand is estimated at US$ 100-200 million, while the potential demand may increase significantly as a result of increasing public awareness of potential candidates and opportunities for investment,” Kelimbetov said. “Demand from pension funds is foreseen to be at US$ 200-300 million for the initial public offerings.”

He noted that 5% to 15% of shares in national companies would be sold on the stock market, the Kazakhstan Stock Exchange (KASE), while the exact number of shares is to be determined by the Board of Directors of the “Samruk-Kazyna” National Welfare Fund.

In other words, no more than 15% of the shares will be sold to any one individual in order to prevent shares from falling into “one hand” but reach the population through the regional branches of “KazPost” (post offices) across the country. Therefore, the government will retain control over the country’s strategic assets at this stage of the People’s IPO.

According to Head of the analytical department of JSC “BCC Invest” Adil Tabildiyev, the “People’s IPO” programme first and foremost will enhance the people’s financial literacy and welfare with the companies’ stock price increase and dividend payment.

“With ordinary citizens becoming shareholders of the largest national companies, they will become public which will increase their productivity as they will pursue the standards of corporate governance and transparency,” he stressed.

A number of financial analysts assessed the Kazakh government’s choice of the first group of companies for people’s IPO as a sound one. cited Michael Carter, chief executive of Visor Capital, the Kazakh investment bank, as saying that the companies selected were “dead easy to understand, not volatile and able to pay dividends” as the first three people’s IPOs to tempt ordinary citizens to invest in equities and stimulate the domestic stock market. Another pundit quoted by FT, Okan Akin, a credit strategist for emerging markets at RBS, commented that “these businesses have stable cash flow and are relatively easy to value”.

As part of the Programme a series of measures on raising public awareness of the Programme’s goals and potential benefits of taking part in “People’s IPO” will be taken. The information on improving the Fund’s company management, creation of favourable conditions for investment on the securities market, and reforming the legislation regulating the stock floatation of the Fund’s sub-companies will also be provided.

The People’s IPO Programme was initiated by President Nursultan Nazarbayev last February. It provides for offering the shares of national companies of “Samruk Kazyna” to Kazakhstan’s population.