Why do you think public offerings have not started again although our stock exchange pursues new peaks?
It would be an unbecoming behavior of BORYAD to not show the right course and notbe constructive while criticizing the Public Offering Campaign. In this article, I would try to explain briefly ‘if we conducted this campaign, what would we do?’
Legal Reforms
The new SPK (Capital Markets Board) law is under way. While the law will be approved by the parliament this year, problems of stock exchange victims can be solved by entering motions. First of all, the distinction between controlling shareholderand minority shareholder should be correctly made and small investors (minority shareholders) should not be allowed in anywayto turn into victims of conflicts between controlling shareholders and the government.
In case of cancellation of privileges enjoyed by electricity generation, distribution, and transmission companies (if these companies are traded onthe exchange), there can be calls to the holders of minority shares based on the average stock exchange price for the last 3 or 6 months. For ÇEAŞ, KEPEZ, and AKTAŞ whose privileges have been cancelled in the past, tender call can be conducted by determining the tender call price at the closing yearand adding the legal interest rate pertaining to previous years. In this way, a legal foundation, which can help Turkish government avoid from paying US$20 billion to Libananco, would be laid.
In the case of seizure of a publicly-traded company or its affiliates by the TMSF (Saving Deposit Insurance Fund), tender call can be made to minority shareholders on the basis of the six-month retroactive average of the last closing market price. Such an attempt would bring an end to the billion-dollar lawsuits at the European Court of Human Rights against which Turkish government currently has to defend itself.
In order to prevent controlling shareholders in poorly managed companies from hiding assets and involving the company in fraudulent bankruptcy, to enable the Capital Markets Board to file a lawsuit and to urgently conclude these lawsuits at the request of the trustee, specially authorized courts should be designated and the acceleration of the process should be ensured by law. In such cases, there should be legal time limits for reports to be provided by panel of experts to ensure quick delivery. Additionally, Capital Markets Board should be able to file lawsuits for imposing injunction on corporate assets.
Independent supreme councils should demand the Capital Markets Board to issue opinion when passing sentence on public companies. These decisions should be made without allowing leakage of information from inside the councils.
These needed arrangements would make hundreds of thousands of resentful investors to return to the stock exchange and stir the demand for companies planning to go public. Besides, new investors would hesitate less when entering the stock exchange and feel much more confident.
On the side of companies;
Only those companies that grant no privilege as to profits and management should be allowed to enter the stock exchange. Companies that are going to enter the stock exchange should be encouraged to have independent board members.
SME (small and medium sized enterprises) style companies that cannot go public but may develop a new product at any moment by means of its growth, position in the market, the patents and royalty it holds or with the help of intense R&D activities, can be allowed to be traded at another market on the stock exchange. We have observed a similar example at the Warsaw Stock Exchange. When companies apply to the stock exchange for the so-called New Market, the institution holds a free acquaintance meeting and invites investors. The company in question participates in this meeting and tells about itself and its projects. Even if the company is not traded on the stock exchange, institutional investors and hedge funds may share in the company. Why wouldn’t the IMKB (Istanbul Stock Exchange)do the same?And what is more, it can do this inthe best way with its quality human resources as long as it is given an opportunity.
If there are doubts about the possibility of damage to small investors due to manipulation in this market then only institutional investors or those investors who sign a special contract or an order stating they are aware of the risks in this marketcan be allowed to carry out transactions.
The Revenue Office should tell companies thinking of entering the stock exchange that they can no longer go unrecorded and that every company will face greater supervision in the coming periods. No one should think they can avoid going recorded by staying away from the stock exchange. Anyway, those having such a mentality should not enter the stock exchange at all.
Various measures can be taken to prevent manipulation and insider trading. The general pattern here is the collaboration of a company’s controlling shareholder with a manipulator. Those who cannot conduct capital increase make a deal with the manipulator and raise the stock price to be able to join paid capital increase. The key characteristic of these companiesis that they are managed by the controlling shareholder through privileged and minority shares. Funds collected through paid capital increase are transferred outside the company by way of hidden resource transfer. During these operations deals are made with foreign-based fund managers, fund managers are paid commissions to ensure they carry out transactions, and investors who invested money in foreign funds are thus swindled. Another manipulation method involves the collection of shares at a low price by the controlling shareholder via the manipulator, creation of high trading volume, and selling the shares to domestic and foreign fund managers who carry out share transactions in return for a commission.
Clarifying the terms of exchange is a good method of preventing manipulation.But besides that, trading volume of the share should be reduced so that the foreign fund manager cannot meet the purchasing criteria that are sought when deciding to buy the shares. And this can be ensured by putting the company into another market temporarily, changing the highest lot and order quantity, and by making the institutional investors carrying out transactions in this share submit an applicationto the Capital Markets Board at the end of every trading day about why they carried out transactionswhile declaring they assume every legal risk of those who invested money in the fund. The Capital Markets Board should take measures directed at the fund that is complicit in manipulation and inform investors about lawsuits that can be filed with reference to these applications.Small investors should fill a special order to be able to carry out transactions in this market and the order should have a wet signature while transactions via telephone or the internet are not allowed. At the end of trading day, the intermediary institution should mail the orders so that they can arrive at the Capital Markets Board in two workdays. The minimum commission rateat this market should be 5 per thousand. The Capital Markets Board should set up a special manipulation tip-off line and create a special e-mail account. Investors should be informed about these steps.
There are doubts about transaction prohibitions
The transaction prohibitions that are currently in operation should be ended. Transaction prohibitions are a practice that can be abused for personal and political purposes and bring the Capital Markets Board under suspicion. There can be retroactive transacting prohibitions concerning transactions done 3 to 5 years ago. And that increases doubts about these prohibitions.
The person who faces transaction prohibitions and accusations by the Capital Markets Board may have to struggle at courts for years in order to be acquitted and may continue his business life with damaged commercial standing. Those acquitted by courts may file claims for compensation.
Frankly speaking, I got wind of many claims regarding SPK’s practice. Some people warned me saying; “As the President of BORYAD, you criticize too much and you may face a transaction prohibition.” When investing in the stock exchange, I began not tochoose shares outside the IMKB-100 index first, and then began to invest in the IMKB-30. If everyone thought like me, who would buy the shares of small companies then? What to blame them for? During our visits to the TBMM (Turkish Grand National Assembly), representatives tell us persistently “We do not invest in the stock exchange”. Do you think the fear of being under suspicion is not behind this discourse? Practices like transaction prohibitions that bring people under suspicion should be ended. TBMM must lead the way in this campaign and the representatives must have shares to start with …