Iran’s largest holding company, Social Security Investment Company, goes public on Wednesday with 12% of its stake via an initial public offering.
SSIC, also known locally by its Persian acronym Shasta, plans to sell 10% of its stakes, accounting for a total 8 billion shares, at the Tehran Stock Exchange. Two percent will go into investment funds.
With each share price around 8,600 rials, it is estimated that the IPO would raise about 68.8 trillion rials ($430 million).
Each institutional and individual trader can buy a maximum 10,000 shares, by placing order through book-building method, according to a notice published on the TSE website.
Book building is a price discovery mechanism that is used in stock markets while pricing securities for the first time. The price discovery involves recording investor demand for shares before arriving at an issue price.
Shasta is an investment arm of the Social Security Organization, Iran’s largest pension fund and biggest insurance firm providing insurance services to wage-earners as well as voluntary coverage for the self-employed.
It is a multidisciplinary holding company that controls nine holdings operating in a wide range of sectors, including petroleum, petrochemicals, pharmaceuticals, cement, transportation, telecom, shipping and finance. The holdings in turn manage 187subsidiaries.
One cement company, for instance, manages 13 cement companies, three mining factories and three engineering plants, most of which are the largest and account for 40% of national output of the material.
SSIC’s gigantic size is indeed the result of the previous government policies that gave the holding stakes in state-owned companies in lieu of its unpaid debts.
Promoting Transparency
Shahin Cheraghi, a member of High Council of Securities and Exchange, told Persian-language economic newspaper Donya-e-Eqtesad that the listing was called for and backed by President Hassan Rouhani.
“For years, the IPO was opposed and resisted by some mid-level managers at Shasta,” the market analyst added, expressing the hope that Shasta’s listing would promote transparency and lead to restructuring.
Mohammad Shariatmadari, the minster of cooperatives, Labor and Social Welfare, described the listing as “realization of a big pledge”.
“By listing Shasta, as the biggest multidisciplinary holding in the country, a major step was taken toward transparency and protecting the interest of shareholders. This is a win-win situation for them and Iran’s economy,” Shariatmadari twitted.
As was the case with previous IPOs, stock market investors probably will be lining up to buy SSIC shares on Wednesday. They did so for IPO of Saba Tamin Investment Company, also one of Shasta’s subsidiaries last Wednesday, when an unprecedented 2 million investors took part.
Critical market analysts say the IPO may make things worse for Iran’s stock exchange as it is likely to absorb large amounts of liquidity from the market with many retail investors being forced to sell other shares at their portfolio in order to access liquidity to place orders.
Listing companies at the stock market has gained pace in recent weeks as regulators strive to expand the market and boost the supply side to accommodate huge amounts of liquidity flowing into the market.
Pointing to the unusual increase in key stock market indicators and price bubbles in shares of the majority of small-cap companies, market analysts say there is a big mismatch between the capacity of the stock market and money flowing into it by an ever increasing number of investors.
Market officials are asked to help boost the supply side by encouraging more companies to list and create an acceptable balance between demand and supply.
