Civil Servant Pension Fund Market Debut

The Capital Investment Management Group, the financial holding of the Civil Servants Pension Organization (CSPO), is to make stock market debut on Wednesday.
In the initial public offering, the company said it will offer 15% of the stake comprising 1.35 billion shares at the Tehran Stock Exchange, according to a notice seen on the TSE website.
With each share priced at 2,800-2,990 rials, the giant holding company expects to generate 4 trillion rials ($17 million) from the IPO.
SCPO is the second largest pension fund in Iran whose premiums are paid by state and government organizations. It operates as an independent body under the auspices of the Ministry of Cooperatives, Labor, and Social Welfare. The organization manages the retirement affairs of civil servants.
The newly listed financial holding is one of the pension’s fund six major holdings. It manages investment portfolios by investing in banks, insurance firms, leasing companies and other financial activities.
The IPO will be accompanied by put option contracts for shares bought on the IPO day. Put options are offered to ensure investors that shares will produce reasonable yields in the secondary trade.
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.
With the strike prices set at 3,647 rials, options at the upcoming IPO will guarantee around 20% gain in one year.
This is the second time put options are offered concomitant to IPOs. The move aims to attract investors and assure them that despite the tumult in the bourse stocks are worth buying.   In light of deep downturn, the IPO’s turned has declined to half over the past year.