With the introduction of the new Code of the Republic of Kazakhstan "On Subsoil and Subsoil Use", MMC companies will have more opportunities for exploration and extraction of minerals. And, as a result, the need for investments. Galina Tsalyuk, Director of the KASE Listing Department, spoke about how to raise money for the implementation of projects.
- Galina Anatolyevna, do you think KASE can become a source of such investments?
- Mining companies, and especially those that have not yet reached the production stage, are always in dire need of investments, since the exploration stage, the development of the field with all the necessary infrastructure are costly stages. If there is no investment, the project simply cannot be implemented. Currently, it is not easy for such companies to attract investments, since banks require collateral. The issue of bonds and their listing on KASE is possible, but does not guarantee their placement in the required volume – due to a very limited range of potential investors due to the high risks inherent in such bonds. But we really hope to help them.
In the first quarter of 2018, KASE launches a startup platform that will be designed to attract investments by SMEs in the form of LLP, which include mining companies that have not reached the production stage. Companies will be able to attract the investments they need to implement projects, including by selling shares in their authorized capitals. Currently, KASE is finalizing the development of internal documents that will regulate the activities of this platform, mechanisms for the accreditation of companies and investors. A significant obstacle to the entry of MMK companies into the stock market with shares was obtaining permission from the relevant ministry for the initial issuance of shares on the organized securities market. We hope that the new law "On Subsoil and Subsoil Use" will provide MMK companies with broader opportunities to attract equity capital.
- What kind of work should the company do before going public?
- First of all, it is necessary to realize that entering the organized securities market means full publicity. That is, the conditions of the company's existence are completely different, when all information about its activities, including financial results, information about corporate events, decisions of the company's bodies and any other significant information, becomes available not only to the management and owners of the company, but also to an unlimited number of people. For many Kazakhstani MMC companies, these requirements are very unusual.
To prepare for such conditions, the company needs to audit all its internal documents, procedures and policies, and assess their compliance with legal requirements. Special attention should be paid to building an effective system of corporate governance and corporate communications.
It is important to clearly define the purpose of entering the IPO, that is: what it is planned to raise money for, the required amount of financing raised through the IPO, the expected result of financing and the period of time that will be required to obtain this result. For investors who participated in the IPO, the result is very important, since the future price of the shares of the company they purchased depends on it. This is also very important for the company, since not only its market value depends on it, but also its reputation and the level of trust of investors in subsequent financing on the securities market.
- The placement of new equity securities of existing companies on the market may lead to a change in the ownership structure, in which former investors are not interested. How do you think this problem can be solved?
- As a rule, a controlling stake is not placed during an IPO. During an IPO, shares are offered to an unlimited number of people, as a result, the ownership structure, of course, changes, but at the same time, control over the company remains with large shareholders. There will be no problems with minority shareholders if the investor relations interaction system is properly built, which is one of the types of corporate communications. KASE actively helps its listed companies that have conducted IPOs in this regard. We regularly hold an Issuer's Day. At this event, the company meets with its minority shareholders and interested persons, talks about its successes and problems, shares plans for the future, answers questions. This is how an open, civilized dialogue develops.
The problem of changing the ownership structure is indeed one of the obstacles to the company's entry into the organized market. However, the transition to corporate governance with the involvement of equity capital from many investors has its undeniable advantages. The company can develop more dynamically. Under these conditions, it is possible that sooner or later the primary owners will have to make a choice towards diluting their share and the emergence of other majority shareholders capable of taking the company's business to a new level. But, I repeat, this can be avoided by strictly controlling the share of shares in free circulation.