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Sunday, 24 November 2019

Egyptian exchange issues new regs on book-building process for IPOs, secondary offerings

REGULATION WATCH- EGX issues new regs on book-building process for IPOs, secondary stake sales: The Egyptian bourse has issued new regulations allowing companies to amend the timeline for receiving orders during the book-building phase of an IPO or stake sale until two business days before the end of the originally announced period, according to an EGX statement (pdf). The regulations require the issuer to notify the Financial Regulatory Authority (FRA) and central clearing house MCDR with the reasons for the changes. The issuer is required to clearly state the intended beginning and end of the book-building process, and record them through the EGX’s OPR platform.

The new regulations also entail greater oversight of the reported orders on an IPO or secondary offering and will also see the EGX announce the share price and order activity during an issuer’s book-building period. The bourse will also automatically scrap orders in the retail investors that overlap with orders from the same party in the private placement portion of the issuance,and will inform MCDR of the total number of approved orders to ensure demand corresponds to the money entering the issuer’s account. If MCDR finds a discrepancy, it will notify the brokerage managing the stake sale, which is then responsible for explaining the discrepancy and amend the reported orders accordingly.

Background: The new regulations appear to be another measure being taken by the EGX and FRA to amend the framework in place for the book-building process of stake sales after the regulator claimed last fall that Beltone Financial’s investment banking arm used a flawed pricing and book-building process for Sarwa Capital’s IPO.

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