On February 11, 2011 President Nazarbayev officially announced what has come to be known as the “People’s IPO”, heralding a second wave of privatization. According to the program, the government will offer minority stakes in major state-owned companies under Samruk-Kazyna’s control on the Kazakhstan Stock Exchange (KASE). This announcement signifies the beginning of a transition from a state-led, wealth-distribution model to the expansion of the domestic investor base through the introduction of more inclusive investment and saving tools to the public.
The “People’s IPO” also constitutes a major step in the advancement of Kazakhstan’s capital markets. First of all, the program aims to improve the general level of financial literacy among the public to create a new class of domestic shareholders among Kazakhstan’s citizens. This group of capital markets conscious citizens will gradually become stakeholders in the country’s economic development and have a say in the corporate governance of its flagship enterprises. In addition to helping redistribute wealth and corporate power, the “People’s IPO” will also give momentum to the development of the local stock exchange, the KASE, as the expanded domestic investor base brings much needed liquidity to the market. In the medium to long term, a more diversified domestic shareholder and investment base will reduce market volatility as well as the need to source short-term foreign “hot money” for ongoing and future projects.
The importance given to the development of the domestic base is clear from the rules of the game; only Kazakhstani citizens will have the right to participate in the “People’s IPO”, according to which they can purchase up to 50 shares in each firm in the program. Once the public experience with IPOs matures, only then will foreigners be allowed to partake in the IPO process; the first sale of shares in energy and mining industries to foreign investors is expected to take place within three years.
It is hoped that the “People’s IPO” will be a rigorous and comprehensive program to change the general attitude of the domestic investor base. In May 2011 Samruk-Kazyna announced the appointment of international and domestic advisers for the coordination of the process, including Citibank (lead advisor), UBS AG, Visor Capital, and KAZKOM Securities. On July 20, 2011, the Fund approved a draft program for the “People’s IPO”. According to the program, the first IPOs will start in 2012. However, the precise timing has not been finalized as yet, and the companies set to be offered as well as the total stakes are also under study.
According to the general business sentiment, in the first round minority shareholdings in Samruk-Energo (electrical energy generation and transmission), KEGOC (the national power grid operator), and Kazpost (the national postal service) are going to be floated. A second wave will follow later with the offering of relatively more strategic companies such as oil and gas company KazMunayGaz, national railway company Kazakhstan Temir Zholy, and atomic energy provider Kazatomprom. Additionally, within the “People’s IPO” the National Bank of Kazakhstan also plans to float 20%-25% of its shares in the State Pension Accumulation Fund.
One other possibility is to conduct secondary public offerings (SPOs) of companies that are already listed, as it might require much more work to launch those with no previous exposure on the KASE. Therefore, selling shares in London-listed KazMunayGas EP, Kazakhmys, or Eurasian Natural Resources Corporation (ENRC) on the KASE could lead to a smoother initiation of what might well be regarded as a new age for Kazakhstan’s capital
© The Business Year