Analysts warn that the companies targeted by the acquisition are on the path to voluntary delisting
The package of buy offers on companies listed on the Egyptian Stock Exchange raised the alarm among market participants in light of the low share prices, especially since most transactions on large percentages of freely traded shares ranged between 90 and 100% of the shares.
There were also concerns about double volumes Trade The crisis that already exists in the market is exacerbated, and in the event that the current offers are implemented, the companies will either be on the way to voluntary delisting or a small percentage of them will be available for trading compared to the period before the acquisitions.
The acquisition offers are not targeting a specific sector or industry, as it is at an ideal time for the fall in stock prices due to various effects on the stock markets and the Egyptian market in particular. Therefore, traders said that the government s support for the market by increasing the supply of companies and encouraging the private sector to offer its companies is no longer an option that accepts study, but rather It has become essential to protect the stock market against an imminent danger to protect.
The delisting scenario was also not new to the market, as last year saw ten cases of voluntary delisting from the stock exchange, most of them after acquisitions that resulted in companies turning into closed companies, and 12 companies were listed in the year 2020 written off. , for similar reasons, while listing operations were very limited. During that period.
While the government announced a plan to offer 10 companies, incentives to the stock exchange, as well as a large fund of several billions in the market to stimulate it, some of them have not been implemented, and in other cases, the privatization and investment processes were selective and slow.
Last week, the “exchange” revealed the postponement of the presentation Cairo BankMeanwhile, investment bank sources working on government offerings to the Stock Exchange have ruled out that this year will see any public or private offerings in the Egyptian capital market.
The sources emphasized that the market is facing a chronic crisis and the withdrawal of the surviving traders after the huge losses that hit the market, not only its capital but its trader base.
Al-Banna: Weak market and valuations are pushing the listed companies towards an emergency exit
Sami Al-Banna, a financial market analyst, expected that if the current conditions of the stock exchange continue due to the low liquidity and the poor appetite of investors, whether Egyptian or foreign, that the Egyptian Stock Exchange will see a wave of voluntary delisting of companies after the low valuations that appeared in the acquisition deals of some of the currently listed companies, compared to high valuations Companies operating in the same sectors, but not listed.
He explained that the UAE Agthia company’s acquisition of Abu Auf revealed the huge difference and the low valuation of the consumer sector companies listed on the Egyptian stock exchange.
He referred to the fact that the companies that have financial liquidity to buy treasury shares are due to the share prices being lower than the fair value and the desire of these companies to invest their money by supporting the share price with the fall in prices in all sectors to low levels.
He also explained that delisting the stock market is not the only danger, but it will come with it, another reaction of investors to it will lead to dire consequences on the market that will increase the problems it is currently experiencing, including ‘ an increase in the number of acquisition transactions for companies listed on the Egyptian Stock Exchange, which will lead to a serious decrease The values of daily trading, and then promote the reluctance to invest in shares, indicating the need for the government to speed up to save the market with a real stimulus package.
Also read: Will the purchases of domestic institutions continue to defy the selling of foreigners in the stock market?
He added that the incentives must be preceded by a decision to inject new blood into the veins of the stock market by implementing initial offers for large and giant companies with strong solvency and with appropriate valuations, setting up controls and criteria for the financial evaluation of the offers, which will revive the market, and will lead to the attraction of liquidity in foreign currencies that help to support the local currency in front of the currency basket.
Domty company exercised an option similar to delisting after agreeing with a group of investors to finance the purchase of free-trading shares and up to 90% of the company’s capital from the stock exchange, protecting the company from hostile takeover bids.
While other companies tried to defend their value, such as “Mr. City for Housing” and “Pachin”, the board of directors of the two companies rejected the prices offered for the acquisition of both and presented the matter to the General Assembly for the decision.
He pointed out that government incentives should include the easing of regulatory restrictions, the cancellation of the capital gains tax for the stock exchange or its postponement for three years, as well as tax exemptions for companies and credit benefits that offer their shares to the market in the coming period.
Patron: Oversupply is an essential solution and needs to be implemented quickly
Mostafa Shafi`, head of research at Arabia Online Securities Brokerage, warned that the recent acquisitions in the Egyptian market entail an optional delisting of most of the shares on which buy offers are made.
He explained that the real estate sector in particular has become a target of acquisition deals.
He added that the solution lies in increasing the supply of companies and injecting new capital into the market, but highlighted the difficulty of implementing government proposals at the moment due to the problems related to valuations, as well as the reluctance of equity investors to pump. liquidity with the monetary easing policy followed by central banks around the world.
He emphasized that the US Fed’s increase in interest rates will again increase pressure on markets and inflation levels will continue to rise as a result of the Russian invasion of Ukraine.
Masoud: The purchase of listed companies’ treasury shares reflects the objective of achieving capital gains within a year
Mohamed Farouk Masoud, a member of the board of the Misr Clearing Company, said that the current situation dictates the need to work to increase the size of the market by implementing proposals for public and private companies to reduce the risk of acquisitions and then voluntary delisting.
He praised the government’s move to rehabilitate the army companies, led by the two “National” companies for the sale and distribution of petroleum products, and the National Company for Production Projects “Safi”, both of which are affiliated to the National Service Projects. Organization, in preparation for listing on the stock exchange.
He highlighted the existence of a large number of unlisted companies and they represent success stories that can offer their shares and increase the depth of the market.
He hinted that the listed companies’ purchase of treasury shares reflected the target of capital gains within a year, due to confidence in the financial performance, in addition to supporting the share price in the face of the decline in most of the prices that in the performance of all shares.
He made it clear that the comparison of the valuations of unlisted companies with their listed counterparts should be fair by the presence of similarities in the size of the business and the business sector, not just one of them.