IPO potential in Kyrgyzstan: applicants can become the Manas airport, Shoro and large banks

The issues of attracting financing do not lose their relevance since the emergence of the fundamental foundations of the economy. They are also important for Kyrgyz companies. Among the many options for raising funds, the instruments of the securities market, including the issue of shares by primary placement on the stock exchange, which is called the IPO, have become very popular.

On how to prepare and conduct an IPO, and which Kyrgyz companies have the potential to attract financing in the stock market - in the article of an analyst consultant of the financial company Senti Aisuluu Zhakypbekova.

IPO (abbreviated from the English initial public offering) is the process of the initial public offering of shares when the company intends to offer its securities to the general public. As a result, the company changes the status of the organization from private to public. The most frequently mentioned types of IPOs are "popular" and "international" IPOs.

"People's IPO" - the word "people’s" means that the sale of shares is primarily intended for individuals and in particular for the citizens of the country in which the issuing company operates.

"People's IPO" has a number of advantages, the main of which are the increase in the well-being of the population, the development of the economy and the stock market of the country. 

In the case of an "international IPO", the sale of shares is carried out among foreign investors by entering companies on international stock exchanges.

The advantage of the "international IPO" for the company is the opportunity to declare itself both in the global investment market and in its segment in international markets, that is, the company also gets an opportunity to occupy a certain niche in this market and compete for leadership. This will have a positive impact on export volumes, which, in turn, will have a positive effect on the company's operations and on the country's economy as a whole.

In order to successfully prepare and conduct an IPO, the company must go from the planning stage to the stage of completion of the placement of shares among investors in the stock market.

The preliminary stage is of great importance for the issuing company, since at this stage the foundation is laid for the successful implementation of the project. The first steps towards the IPO start with planning and preparation, which include:

  • Analysis of the appropriateness of an IPO taking into account the features of the business. Evaluating the feasibility of entering an IPO, management should find out the level of the company's readiness to enter international public markets and the investment attractiveness of securities offered to investors.
  • Development of a long-term business plan and a timetable for its implementation. If the management still decided to exit the company for an IPO, then it primarily begins to develop a plan and schedule of the IPO.
  • Preparation of "investment history". In order to increase the interest of potential investors in the acquisition of shares, the company needs to have an attractive backstory..
  • Analysis of competitive advantages of the company or business.
  • Work in accordance with the principles of the public company prior to the IPO, which implies the maintenance of financial reporting in accordance with IFRS standards, the availability of audited accounts for previous years, transparency and openness of business, internal control and corporate governance in the company. Also a huge plus for the company is the availability of significant experience in public issue, placement of securities on the domestic market.

In many developed countries, the company's entry into the local stock market is one of the preliminary stages before entering international markets ("People's IPO", bond borrowing).

It should be noted that the process of preparing for an IPO often lasts from 1 year to 2 years. In addition to the above activities, at the planning stage of the company, it is necessary to choose an exchange for an IPO. The main selection criteria for the issuing company will be the regulatory requirements and costs for placement.

Currently, most companies use foreign stock exchanges to conduct an IPO. The most common of these are the New York, Hong Kong and London Stock Exchanges. However, the requirements set by foreign exchanges are not always feasible for medium-sized fast-growing companies.

The alternative for companies in this case is the so-called "children's stock exchanges" or "alternative exchanges". For example: the London Stock Exchange, in addition to the main site for accommodation, including an alternative site, which is called AIM (alternative investment market).

  • AIM is a site with high financial resources, which is used mainly by developing companies. The listing requirements are quite liberal, which makes it the most attractive on the part of foreign companies. This allows us to regard AIM as the most attractive and effective from the standpoint of choosing foreign analogues exchange.

At the planning stage, the need to choose the right moment is one of the main factors for the success of the upcoming IPO. For example, companies that entered the market on the eve of the global financial crisis, failed

The second stage when entering an IPO is its immediate implementation, which includes: the creation of a strong management team, the selection of professional consultants, the development of commercial, financial processes and infrastructure, the creation of a corporate structure and management model, the establishment of relations and information interaction with investors and the conduct of successful exit presentations.

The final stage is the placement and completion of the IPO, which is based on attracting and meeting investors' expectations, as well as continuing the implementation of the company's current activity in the status of publicity.

Almost every successful and large company, reaching its peak, decides to become public and passes through an IPO procedure, which can be beneficial both for the company and for existing shareholders.

The main advantages of IPO are the possibility of obtaining long-term and relatively cheap financial resources for development and expansion of activities, increasing the capitalization, prestige and reliability of the company, due to the acquisition of the publicity status, as well as the possibility of implementing various growth strategies and partial exit of existing shareholders with significant profits. 

The company's entry into international public markets through IPO is a laborious, but at the same time, an effective process that promises huge opportunities for the company in the future.

Kyrgyzstan

Domestic companies in Kyrgyzstan at the moment do not have the experience of conducting an IPO on international exchanges, while in neighboring countries this tool for attracting capital investments has become widespread.

According to most analysts, among domestic state-owned companies, Manas International Airport, TNK Dastan and many others, including major representatives of the banking sector, could become IPO candidates.

Among private companies, "Shoro" Company is recognized as the fastest growing company that shows stable growth of business, which has successful experience of attracting external financing through the issue of corporate bonds on the stock market of Kyrgyzstan. 

Currently, IPOs and companies are entering the international public markets in Kyrgyzstan. Companies, both private and public, need long-term and long-term funding sources.

"International IPO" can become for companies another stage of development and help on the way to gaining leadership in international markets. As a result of the expansion and development of individual enterprises, the economy of the country in which they operate also develops.

In this regard, IPO can be perceived not only as an instrument for attracting capital investments for enterprises, but also as an engine for economic development.

Source: https://www.akchabar.kg/article/business/ipo-kg/.