Istanbul Seeking Finance Hub Status Grapples With Delistings

By Isobel Finkel and Constantine Courcoulas Jul 21, 2014 9:20 AM GMT+0100

Turkish companies with small free floats are applying to delist from the stock exchange as the government says it’s switching to an emphasis on quality over quantity in its ambitions to make Istanbul a financial center.
New rules make it cheaper for majority shareholders to buy out smaller stakeholders in companies with free floats of less than 5 percent by setting the price at the 30-day average before the announcement and removing any interest payments. Alternatifbank AS (ALNTF), a lender owned by Commercial Bank of Qatar, OMV AG (OMV)’s Turkish fuel retailer Petrol Ofisi (PTOFS) and battery producer Mutlu Aku & Malzemeleri AS (MUTLU) are among at least five companies that have expressed intentions to delist since the legislation went into effect at the beginning of the month.
Prime Minister Recep Tayyip Erdogan announced a plan to turn Istanbul into a regional financial center in 2012 with a campaign called ‘ListingIstanbul’ that aims to lure more local and regional companies to Turkey’s $276 billion bourse. While Borsa Istanbul Chief Executive Officer Ibrahim Turhan said in September that volatility last year hampered the push, Murat Yilmaz, executive vice president of the Borsa Istanbul, said in an interview last month that he expected 12 more initial public offerings this year on top of eight already completed.

“Increasing the number of companies on the exchange isn’t the only thing that’s important to us,” Borsa Istanbul spokesman Ugur Bati said in e-mailed comments. “What’s important is that we have quality companies with high market capitalizations and big free floats trading on our markets.”

Quality Compromise

Of the 90 IPOs in Turkey since 2010, 83 have been for companies with a deal size lower than $100 million, according to data compiled by Bloomberg. Those shares have declined 13 percent on average since they started trading, compared with a 55 percent gain on the Borsa Istanbul 100 (XU100), which tracks the 100 largest companies on the exchange.
Because shares in companies with low free-floats can experience sharp price swings, allowing them to delist is positive for the development of the market, Kocabalkan said.
Deputy Prime Minister Ali Babacan said in a speech in Istanbul earlier this month that Turkey’s IPO campaign had “compromised on quality” and that the same mistakes shouldn’t be repeated.
“We increased the number and what happened?” Babacan said in an address to capital markets officials on July 8. “We also have to pay attention to quality, not just numbers.”
To contact the reporters on this story: Isobel Finkel in Istanbul at ifinkel1@bloomberg.net; Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.net