Egypt’s top tobacco-maker and the second-largest source of revenue for the state budget after the Suez Canal Company, the Eastern Company has listed 4.5% of its shares on the country’s Bourse. The company’s revenues are estimated at 55 billion Egyptian pounds ($3.17 billion) for fiscal year 2019.
The company’s shares were listed in a private offering after the end of the trading session on the stock market at a value of 1.721 billion pounds ($99 million). The listing targeted top investors, mainly Emirati investor Mohammad al-Ghobar, in addition to Saudi businessmen who bought 25% of the listing worth 400 million pounds ($23 million).
Professor of finance and investment at Cairo University Hisham Ibrahim said that the current government is not the first to come up with a private offering, as this has been going on for the past 25 years. He explained that public offering alone guarantees the covering of the initial public offering (IPO). “Things are different with private offerings that include several investors representing different institutions and have a vision of development, unlike the fragmentation of shares by a large group of small investors,” he said.
“Listing 101 million shares in a public offering could affect the share price negatively if the IPO is not covered. Meanwhile the private offering could protect the share price, especially since the shares [of the Eastern Company] have been traded on the Egyptian stock market for years. Before the offering, the private sector owned 45% of the company, and the state-owned Chemical Industries Holding Company 55% of the company’s shares. It is only normal to list most of the 4.5% of shares in a private offering,” Ibrahim noted.
He added that there is a mechanism to determine the price of the share, either in private or public offerings, in the IPO program provided for in the prime minister’s Decision No. 926 of 2018 on the reorganization of the provisions of state-owned companies’ IPO. “The offer price of the shares will be based on their average price a month before the offering is made, plus or minus 10%,” the decree states.