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Monday, 2 March 2020

Egypt’s FRA suspends 3-day notice requirement for treasury stock purchases

REGULATION WATCH- Market regulator suspends three-day notice requirement for listed companies’ treasury stock purchases: The Financial Regulatory Authority (FRA) introduced a new temporary rule that will allow EGX-listed companies looking to purchase treasury stocks to notify the bourse on the same day they plan to buy the stocks, instead of three days in advance, according to an official statement. The new rule bars majority shareholders from engaging in the sale. The FRA said that the decision is meant to boost trading and hedge against turbulence in the equity markets (see above). The market regulator did not specify how long this measure will be in place.

What exactly are treasury stocks? These are shares that a company had sold on the open market and then bought back from stockholders. Companies usually buy back these shares to reduce their exposure on the open market, which also reduces the chances of a hostile takeover. Holders of treasury stocks do not have voting rights.

Egypt Kuwait Holding was the first to jump on the wagon, announcing in an EGX filing (pdf) yesterday that it will buy USD 20 mn of treasury stocks yesterday.

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