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Tuesday, 8 September 2020

EBRD could support small-caps facing new sponsor regs

Nilex companies could get a hand from the EBRD in move designed to draw interest to the small-cap exchange: The European Bank for Reconstruction and Development (EBRD) offered to cover 50-70% of the costs paid by Nilex-listed SMEs for financial sponsors, in a meeting between EGX management and 15 of the sponsors on Monday, Youm7 reports. The financial assistance will provide relief to small-cap firms, which are now required by the Financial Regulatory Authority (FRA) to contract with sponsors when they list their shares on the Nilex.

What is a sponsor, exactly? Similar to the nominated advisors (‘Nomad’) used in the UK’s small-cap market, sponsors are financial advisors that assess the suitability of SMEs for listing on the exchange and assist qualifying firms in both going public and meeting their responsibilities after listing. Following yesterday’s meeting — attended by EGX management, 15 sponsors and EBRD representatives and EGX board member Ahmed Bahaa Shalaby on behalf of the SMEs — the responsibilities of sponsors will be broadened beyond helping with registration to include issuing research reports on Nilex firms, a source that attended the meeting said. The idea is that, by providing additional expertise and support, small firms will see increased trading that could allow them eventually to upgrade to the main market.

More than half of Nilex firms aren’t too happy with the new rules though: Seventeen of the 26 Nilex-listed companies submitted a joint statement to the FRA demanding that it scrap its decision to allocate companies official corporate sponsors. The firms argue that requiring a sponsor throughout the registration period is a needless financial burden on SMEs whose returns are already limited, especially during the poor business environment caused by the pandemic.

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