In Art. 3(f) of the Capital Markets Law No. 6362, the initial public offering is defined as "a general call made by any means for the purchase of capital market instruments and the sale made after this call". Based on this definition, the sale of capital market instruments is subject to certain rules due to its complex nature. In this context, the Resolution of the Capital Markets Board dated 30/03/2023 and numbered i-SPK-128.21 ("Resolution") regarding the implementation of the provisions of the Communiqué on Sale of Capital Market Instruments numbered II-5.2 ("Communiqué") and published in the bulletin numbered 2023/21 of the same date.
Initial Public Offering Process
After the definition of the initial public offering, the public offering is in accordance with 3(g) of Capital Market Law No. 6362 ("CML"). As stipulated in the article, "real or legal persons who have applied to the Board to offer their capital market instruments to the public". Therefore, it can be seen that the application process is also important.
The public offering process of the shares is subject to the review of the CMB, and the process of being traded in the stock exchange is subject to the review of Borsa İstanbul. The process takes place as follows:
Preliminary Process
Application
On-site Inspection
Approval of the Prospectus for the Shares
Public Offering of Shares
Announcement of Sales Results and Trading on the Stock Exchange
The Borsa İstanbul process will continue simultaneously.
CMB's Resolution
Together with the Resolution dated 30/03/2023 and numbered i-SPK-128.21, it basically constitutes the Resolution regarding the implementation of the provisions of the Communiqué in the initial public offering of the shares of non-public corporations, in order to protect the rights of investors and ensure equal practices among investors.
In this Resolution, firstly, a distinction was made within the scope of the market value of the shares and it determined the thresholds according to which the methods specified in Art. 13 of the Communiqué will be used. According to the Resolution, it is stated that in case the market value of the shares is 750.000.000 TL or less, the stock market sales method will be applied, on the other hand, if the market value is over 750.000.000 TL, the use of the sales method by way of book-selling outside the stock market will be taken as a basis.
As stated in Art. 16 of the Communiqué, the stock exchange sales method refers to the sale of capital market instruments in the stock exchange within the framework of stock exchange regulations. In this context, it is stated that the principles of the method will be determined by the stock exchange. In this method, before the public offering prospectus is approved by the CMB, the stock exchange considers the company's application to be traded and decides whether to accept the public offering application in the primary market.
Secondly, it is stated in the Resolution that if the market value of the shares is over TL 750.000.000, the method of selling by way of book-building over the stock market will be taken as the basis. As stated in Article 14 of the Communiqué, the sales method by way of book-building refers to "the collection of the demands of the investors regarding the capital market instruments offered to the public and the sale of the portion of these demands met within the framework of the predetermined procedures and principles", and in this case, the sales method specified in the prospectus will be applied. Within the scope of this method, the sale can take place in three different ways:
Order picking at a fixed price
Request collection with a quote
Order picking with the price range
In the Resolution, a set of rules has been adopted in order to protect the rights of investors and to ensure equal treatment in the case of using the sales method by way of book building.
According to Art. 20(2) of the Communiqué, it is stated that "in case the demands are less than the amount of the capital market instrument offered for sale, all demands will be met" and the proportional distribution in the 3rd paragraph of the same article will not be applied in the name of the equal application. In the Art. 20(3) of the Communiqué is stated that the "proportional distribution method, in which the ratio of supply meets demand by dividing the total amount of capital market instruments allocated to any investor group by the total demand received by this group," can be used if requested. Therefore, equal distribution to all investors in the individual investor group was prioritized.
The second striking point is the statement in article 2(ç) of the Resolution that the following companies, which were previously considered as institutional investors, are not accepted as institutional investors, but will be accepted as individual investors.
Portfolio management companies,
Intermediary institutions,
With the requests forwarded by investment and development banks on behalf of their customers with whom they have signed individual portfolio management contracts,
Real estate investment funds,
Venture capital investment funds,
Investment funds with the phrase free and/or special in their titles.
The CMB, which has established the principles regarding the fact that the investors who receive shares from the distribution cannot make transactions within certain periods, aimed to ensure the transparency and competition of the market after the public offering.
In Art. 2(e) of the Resolution, it is stated that "in the case of an investor group that does not receive sufficient demand, the unmet portion of the allocation of that group will be first transferred to the domestic individual investor group in order to meet the unmet demands, if any" and "after this transfer, or if there is not as much demand as allocated to the domestic individual investor group, the remaining portion can be freely transferred to other groups".
Finally, in Art. 6 of the Resolution, the Resolution of the Capital Markets Board Decision Organ numbered i-SPK 5.2 (dated 19/01/2023 and no. 3/96) and clause (ç) of the Decision dated 11.11.2021 and numbered 59/1669 has been repealed.
Conclusion
In addition to the Resolution, which shows that a step has been taken on the criticisms of the European Union regarding the protection of investor rights and promoting long-term investor engagement in terms of company law, currently the duty of the CMB is also stated in Article 1 of the CML. It is envisaged as "regulation and supervision of the capital market in order to ensure the functioning and development of the capital market in a reliable, transparent, efficient, stable, fair and competitive environment, and to protect the rights and interests of investors".
With the CMB's Resolution of Principle, it is seen that the operation of capital markets is based on equal practice, the protection of investors' rights and the protection of market competition.
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