Upcoming IPO of Samruk-Kazyna to be in mixed mode

The Samruk-Kazyna Fund told about the IPO of its subsidiaries. The current campaign will differ from the last one in that it will be in a mixed format. This means that in addition to private investors, large ones, including international investors, will also participate.

In today's world, companies are aware that in an environment of high competition, technology development, commodity markets and capital markets, it is necessary to constantly develop. IPO (initial public offering of shares) is one of the stages of the company's development, which opens up new opportunities to enter world markets.

The fund notes that the IPO of one of the largest companies in the country on the Kazakhstan stock exchanges will have a positive impact on the development of the domestic securities market, as well as increase the number of retail investors. Thus, Kazakhstani investors will have a unique opportunity to take part in privatization and become shareholders of the country's largest national company.

In 2012 and 2014, the IPOs of KazTransOil and KEGOC were held in the format of a people's IPO, that is, with the priority participation of ordinary Kazakhstanis and pension funds. At the same time, the number of shares for sale in one hand was limited. The placement of shares took place on the KASE stock exchange. Then the possibility of participation of foreign investors was not provided. In addition, a large-scale information campaign was conducted in advance for wide coverage, including the regions of Kazakhstan.

The initial public offering of shares on the stock exchanges is considered the most effective and transparent way of privatization. However, the requirements for the candidate company are quite high, so not everyone can enter the securities market. As a rule, the most prepared large companies with a stable business model and stable cash flows are brought to the IPO. Thus, KMG meets all the basic requirements and international standards for corporate governance and information disclosure. The company has a long history in the public debt capital market, and is in constant contact with international investors.

During the IPO of JSC NC "KazMunayGas" a mixed format will be used. This means that such key elements of the people's IPO as a long subscription period, long-term information work, and the emphasis will be placed on the participation of Kazakhstani retail investors. However, this year, both local and international institutional investors will be able to purchase KMG shares.

In addition to the KASE stock exchange, the shares will be placed on the stock exchange of Astana International Financial Center. The preliminary information campaign will be conducted with the active use of social networks, mobile applications. Kazakhstanis will be able to apply for the purchase of shares both through post offices and through mobile applications of the AIX exchange and broker-dealer organizations.

The fund notes that a mixed approach will be beneficial both to the issuers themselves and the selling shareholders, as well as to all citizens participating in the IPO. Therefore, the fund plans in the future to also apply a mixed approach in conducting IPOs of national companies.

How suitable is the crisis year of 2022 for an IPO?

The fund believes that it is usually quite difficult to find a suitable time for an IPO. For example, when oil prices are high, shareholders are not interested in selling shares, since the company already generates stable profits and is under full control. If energy prices, on the contrary, are low, then in this case no one wants to go to the IPO, since the market valuation of the company will also be low.

Despite the market volatility, the IPO will always be a priority for companies, because it forms their investment history, and also opens access to international capital markets. Even if the company already had access to public securities markets (for example, through Eurobonds), after the IPO it will be able to attract capital from equity investors quite easily.

In the case of IPO of state-owned companies, such as KazMunayGas, the benefits may be even greater: after all, this is another important way to denationalize the economy, further develop the domestic securities market, which, in general, increases the investment culture and financial literacy of Kazakhstanis. At the same time, it is extremely important for all investors to understand that any investment in securities is always a risk, so the decision to invest should be balanced and conscious.

The results of the IPO of Kaztransoil, KEGOC and Kazatomprom are generally successful. If we talk about "KazTransOil", then since 2012 the price of one share has increased from 725 tenge to 808 tenge at the end of July 2022. At the same time, dividends are paid annually. Since 2014, KEGOC's share has grown from 505 tenge to 1,606 tenge, also with an annual dividend payment. Kazatomprom shares rose in price from 4,322 tenge to 13,870 tenge at the end of July 2022.

Given the high volatility and negative investor sentiment in developed markets, the fund decided to hold an IPO on Kazakhstani exchanges. Now the activity of issuing companies in our region is strongly influenced by the global geopolitical situation. As a result, the IPO activity of companies from our region is extremely low. In addition, for the most part, issuers from emerging markets (not only from our region) conduct "home" IPOs on local stock exchanges.

"International investors from developed markets are more likely to evaluate issuers from our region in the context of regional geopolitical risks, while Kazakhstani investors are more "stable", as they are more familiar with the situation in the country, the activities and brand of national companies and, accordingly, will more optimistically assess their situation and future prospects. In addition, holding an IPO in a local format allows for early marketing and a longer subscription period for the population, which will positively affect the popularization of the investment culture and the further development of domestic stock exchanges," the Public Relations Department of Samruk-Kazyna JSC said.

Now the minimum threshold for participation in the popular IPO is not defined. However, it is planned that it will be low in order to give an opportunity to as many Kazakhstanis as possible to participate in the IPO. At the same time, the fund notes that the opportunity to receive dividends does not depend on the number of shares that the investor will buy, but the larger the block of shares he owns, the more dividends can be received in the case of payments.

On the eve of IPO, a single reference Internet resource will be created, a hotline for the population will begin to work. Investors will be able to get all the information of interest about the issuing company, investment methods, the specifics of the securities market and possible risks.

On the state of the domestic investment market

Recently, the market of private investors in Kazakhstan has noticeably intensified. For example, in the first half of 2022, the number of retail investors tripled compared to the same period last year.

In total, since 2012, the number of accounts opened in the system of Central Securities Depository JSC has increased from 54,500 to 367,000 at the end of the first half of 2022.

According to the Central Securities Depository, most of the accounts are active, and securities trading on the stock exchange has increased in proportion to the growth in the number of accounts. The growth in the number of investors is associated with a decrease in the threshold for entering the market. For example, it has become easier to open a brokerage account, you can do this remotely using special applications.