CAIRO: The Nile Stock Exchange (NileX) – the Middle East’s first stock exchange for small and medium enterprises – recently chose two nominated advisors for prospective SMEs to register with: White House Securities and Fincorp Investment.
To be eligible for listing on the baby bourse, SMEs have to be sponsored by a nominated advisor.
The nominated advisor may or may not own a stake in the firm it represents, but will guide and assist the company in dealing with the stock market. The advisor will also be responsible for informing the Capital Market Authority (CMA) of the company’s disclosures, listing and pre-listing requirements.
“Sponsors are still applying, and we are examining their eligibility requirements, said Hatem Shafie, assistant to the chairman of investment and financial affairs at the bourse. “Until now, we have approved of two advisors, and five more currently await approvals.
“Nominated advisors may be a venture capital company, an investment bank, or a private equity company that is capable of being responsible for the [SME] and of divulging its [financial statements] to the CMA as well as adhering to corporate governance, he added.
Active trading on the NileX is expected to begin within two to three months, with around five SMEs making their debut, the Egyptian bourse told Daily News Egypt on Thursday.
“So far, five SMEs have been enlisted, and we expect that number to double within a short period of time, said Shafie. “We are currently looking into details of five more companies that applied for registration.
The stock exchange has not yet revealed the names of these companies, but according to Maged Shawky, chairman of the stock exchange, the announcement will be made as soon as details have been finalized with the companies in question.
The NileX was officially launched on Oct. 25 at an event jointly organized by the Ministry of Investment and the Egyptian Junior Business Association in a bid to develop Egypt’s struggling SME sector.
“The NileX will offer immediate support to existing small-to-medium enterprises. It will allow joint stock companies to become larger, expand their business and upgrade their competitive edge. It will also provide a more lucrative investment environment for international investment coming into Egypt and diversify the group of industries represented on the stock exchange for local investors, Shawky said during the event.
The SME stock exchange, he explained, was a natural evolution in Egypt’s growing economy. “SMEs contribute 70-80 percent to our GDP. This is a big chunk. These companies should not be ignored. They should be our platform for creating the giant companies of the future that will produce, export, and reduce the unemployment rate.
“This group of companies that we are targeting will be providing the jobs 5-10 years from now. It is crucial that we work very hard to meet their needs today. You cannot just depend on the existing large companies and let it rest at that. The large companies of today were once small, too. They had to suffer in order to reach their current size. We are just trying to facilitate the process, he added.
Companies eligible to list on the new baby bourse will have a paid in capital that is more than LE 500,000 and less than LE 25 million. In addition to the capital requirements, a company will have to offer 10 percent of its shares to the market within one year of listing, at least 25 shareholders within one year, and a minimum of 100,000 shares floated. Quarterly, semi-annual and annual disclosure regulations will be in line with those of the Egyptian stock exchange. Guidelines to enlist involve lower transaction fees than that of the regular bourse to encourage many companies to register.
Trading on NileX will be conducted through the “call auction system or bidding as opposed to the conventional buy/sell transactions utilized by the Egyptian bourse. The highest bidder acquires shares in the company.
Transactions in a call auction system are completed at the end of a trading session, where brokers record orders on the same security with different prices according to client orders. Prices are determined at the end of a session based on a consensus value after a full set of orders has been made. “That method will help minimize manipulation of share prices, Shawky stated.
Trading sessions, Shafie added, will be one hour long, much shorter than those of the regular stock exchange and with no price limits.
