Tehran Stock Exchange on Wednesday will host the first initial public offering from Kourosh Food Industries (KFI), one of the biggest food producers in Iran.
KFI is the third company to make debut since the beginning of fiscal year in March and the first to go public this year. It will be the 546th listed company at the TSE.
According to a notice on the TSE website, the company will offer 8% of its shares comprising 240 million shares. Each share will be offered at a minimum 28,500 rials and maximum 29,950 rials.
KFI is a subsidiary of the giant Golrang Industrial Group and was founded in 2011 as producer, importer and exporter of oil and byproducts. It is the owner of the popular edible oil brands Oila, Famila, Kimbal and Suntin.
The IPO is to be accompanied by put option contracts for shares sold at the IPO day, said Mahmoud Goudarzi, the TSE deputy for market affairs.
Put options are offered to ensure investors that shares will have reasonable gains in secondary trade. “The options will guarantee at least 25% gain in one year,” Goudarzi was quoted as saying.
A put option is a financial market derivative instrument that gives the holder the right to sell an asset at a specified price (the strike) by a specified date. Put options are most commonly used to protect against a fall in the price of a stock below a specified price.
If the price of the stock declines below the strike price, the holder of the put has the right, but not the obligation, to sell the asset at the strike price, while the seller of the put has the obligation to purchase the asset at the strike price if the owner uses the right to do so.
This is the first time put options are being offered concomitant to IPOs to encourage the people and reassure them that buying shares is still a good investment.
With the fading fortunes of the stock market, few investors have shown interest in IPOs in recent months. Last week when the Iranian Lead and Zinc Production and Development Company went public, 2.45 million trading codes took part. That was less than half the record for IPO turnout last September.
