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A Limit Towards Companies With Low Public Offering Rates Is On Its Way



Preparations have been launched for the new regulations aiming to strengthen the capital market and protect the investors. These new regulations will be for the companies with a public offering rate of 5% or below and daily increase limit is estimated as 5% to 7.5%.

The government is taking highly important steps to clear the way for the investors and protect their interests, from “appraisal right” to “fair value”, in the capital markets. The Capital Markets Board and the Istanbul Stock Exchange have started to work on companies with very low public offering rates, which can open doors to manipulative transactions. In his statement, CMB Chairman Ali Fuat Taşkesenlioğlu said: “We are working with Istanbul Stock Exchange about what kind of precautions we can take in terms of transaction principles, regarding companies with a public offering rate of 5-10% or below. Perhaps, the daily increase limit might be 5% to 7.5% for the companies with a public offering rate of 5% or below. Our colleagues are working on the matter. We are trying to establish transaction principles that will require investors to be careful while making transactions.”

Chairman of the CMB, Taşkesenlioğlu, informed the members of the Parliamentary Commission regarding the new regulations that will strengthen the capital market within the scope of the banking law proposal. Noting that the “weighted average price based on 30 days” is replaced by a “fair price” application, that is determined according to five criteria, he stated that taking only the prices of the previous month causes possible manipulative and market disruptive transactions; therefore, it does not reflect the real price as it should. Taşkesenlioğlu stated that since the main factor here was to protect the rights of investors, without taking weighted average price based on 30 days, they were aiming to apply the highest average price amongst the last six months, the last year and the last five years by including the valuation report and to eliminate unjust treatment towards investors.

As a response to the questions regarding the prevention of manipulative transactions and increasing the public offering rates in companies with very low IPO rates, Taşkesenlioğlu made the following statement: “The margins in "Stock Market 1-2”, “Main Market 1-2” are 20%. we are working to drag that percentage down. both our side and İstanbul Stock Exchange is working on that”. Reminding that exercising the appraisal right causes a decrease in the equity of the publicly held companies, Taşkesenlioğlu expressed that with the new regulation, to reduce this negative effect, shareholders who will use the appraisal right will also have a chance to offer and sell their shares to both the shareholders and individuals outside the partnership.

Stating that there were significant transactions resulted with the exercise of appraisal rights in 52 companies during 2017 and 2019, Taşkesenlioğlu gave the following information: “8 of them were mergers, 1 was a division, 6 were activity changes, 15 were related party transactions, 18 were sale of property, 1 was leasing, 2 of them were establishment of right in rem, of them was closing debt to the parties by using the fund obtained from the capital increase. In 32 of these 52 instances, investors did not participate in exercising the appraisal right and did not exercise their appraisal right. Only in 2 cases of the 18 instances which investor took part in, investors’ ratio to capital was above 10%; while for the remaining 16 companies this rate was below 5%”.

With the proposal of the regulation, the CMB is empowered to determine different procedures according to the nature of the public companies. Shareholders will be able to benefit from the mandatory bid if they bear the title of the shareholder on the public announcement date of the transaction. After this date, shareholders will not be able to benefit from the call price. Through the Board, investors and issuers will be able to negotiate mutually when the terms and conditions of debt instruments need to be changed.

Intermediary institutions are provided with the opportunity to securitize loans in large projects such as project finance loans, infrastructure investments; to issue securities based on the cash flow of these projects; and to establish a project finance fund.

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