Egypt is about to see what we think is the first tradeable rights issue by a privately held company under a regulatory change passed early last year. A domestic press report quotes GAFI chairman Mohsen Adel as saying that a major (unnamed) food and beverage outfit is about to undertake a transaction.

Background: We had reported in January 2018 that the EGX was prepared to allow subscription rights in capital increases for unlisted companies to be traded over-the-counter. This would allow unlisted companies to finance expansion without having to list on the market and expand their investor base.

The measure is a work-around that could interest startups and other new companies: One very smart lawyer told us last year that the regulatory change would allow for the right to subscribe to the capital increase of an unlisted company to be traded separately. He said the change would make it possible to add new investors to recently incorporated companies that have not yet issued two sets of financial statements by allowing the founders to sell their right to subscribe to the capital increase to new investors.

Separately: A market for corporate paper? GAFI is also preparing unspecified rules on corporate bonds and other financing tools that it plans to ask the House of Representatives to review, the domestic press reports.