Arranging for an Initial Public Offering (IPO) | KPMG | EG

Arranging for an Initial Public Offering (IPO)

Arranging for an Initial Public Offering (IPO)

Security offering, Public offering, Private offering

Security offering, Public offering, Private offering

Security offering

  • Public offering

 

The required documents:

 

  1. A public subscription approved by EFSA
  2. The shareholders' resolution with special majority
  3. Fair value report issued by the financial adviser


Approaching the regulator as early as possible for any proposed IPO will ensure a smooth process Because of the complexity of the IPO process, the advisers need to be appointed at an early stage.

Advisers comprise investment banks/underwriters, solicitors and the auditors’ broker and financial advisers.
Underwriters needs to have licences under EFSA rules and regulations.

The minimum issued capital for a company entering into the IPO process in the primary market is LE 1,000,000, which is equivalent to US$ 129,000, and the authorised capital must be less than five times the issued capital and the founders obtain, at a minimum, 50 percent of the shares (according to CMA law).

Listing on the EGX takes place after the completion of the IPO procedures that lead to meeting the listing requirements in EGX, and the process of the IPO to be approved by EFSA.

In addition,  listing is managed by EGX and it is the responsibility of the listing committee to look after the revision, verification and approvals of the applications for listing According to the rules of CMA law, if the public offering is issued in the primary market only, the shares are issued by the company either through establishment or through the increasing of capital.  Practically there is a precedent in the Egyptian market for public offering of unlisted shares in the secondary market.

  •   Private offering

 

It is needed by individuals or corporate firms, which should be qualified investors.
The private offering doesn’t require the issuance of a subscription prospectus which should be published in a daily newspaper, which required by the IPO.
Information memorandum is to be submitted and its contents have less detailed information compared to an IPO prospectus.
Qualified investors should have financial criteria or experience related to securities market.

Trade in securities 

Listed or non-listed shares are monitored  by  EGX ,the licenced member firm only has the right to issue orders on the EGX and, through its rules, trades may carried out through protected transactions under the rules and procedures of EGX which are approved by EFSA.

The chairperson of EGX has the right
to transfer any cases to the Trading Committee for the decision of giving
protection; examples of these cases are connected party deals and banks
exercising a pledge or affiliated and subsidiary companies.

For the trading in non-listed shares which will be offered to the public, it should be done through brokers licenced by EFSA and there are no requirements regarding trading in shares with pre-emption rights. Exceptions can be included in the articles of establishing the company.

 

Listing on EGX

Listing shares on EGX should have the following rules:

 

  1. Requirements for eligibility should be obtained before listing the securities.
  2. The laws of Capital Markets which govern the EGX.
  3. Additional disclosure obligations for the content of the documents delivered.

Some initial listing requirements are as follows:

At least five million shares with at least an amount of fifty million Egyptian pound as fully paid up capital. 
The number of shareholders should be at least three hundred and a minimum of 5 percent free float of its share capital. 
In addition, ongoing compliance should be adhered to. 
The responsibility of following up continually on the listing requirements is for the Listing Committee.

 

Dual-Secondary listings

Foreign securities could have a dual primary listing in Egypt:  listing on a recognised exchange and fulfilling the requirements for eligibility as mentioned above; in addition, foreign exchange should be under the supervision of the authority which similar to the authorities of the EFSA.

For the Egyptian issued depository receipts for offshore issuers could be registered which common in practice 

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