SEO Clears Way for Major Iranian Startup IPOs

EghtesadOnline: Iranian startups and major online businesses are on the cusp of a profound change, getting listed on the stock market. The move as described by the head of Iran's Securities and Exchange Organization heralds a new era, which authorities have been trying to prepare the ground for.

News ID: ۷۴۵۵۵۷

02 July 2018

"There are no obstacles in the way of major startups such as Digikala and Snapp to become involved in the stock market," SEO chief Shapour Mohammadi has been quoted as saying by IBENA.

Mohammadi was speaking in reference to rumors going around that the organization is creating obstacles in the way of startups to deny them a place on the stock market.

Digikala is Iran's largest e-commerce store and Snapp is one of the leading ride-hailing apps in the country. The two companies are among the most likely candidates for an initial public offering, Financial Tribune reported.

Given the widespread popularity of the two startups among the youth, it is highly possible for them to attract investors that would buy company shares. So far, no startup has entered Iran's stock exchange market.

>Luring Investors

Mohammadi says one of the major issues which will determine startups' survival in the capital market is their capability to attract investors.

He maintained that the SEO has held meetings with the ministries of ICT, economy and labor as well as the Vice Presidential Office for Science and Technology to promote the cultivation of a culture of investment in startups and online companies among the public.

As a result, the Iran Fara Bourse, the country's junior market, has been put in charge of fostering a culture among the population that would support small businesses.

Head of the SEO said they have taken measures to prepare for IPOs of fintechs, startups, knowledge-based companies and venture capital funds in the stock exchange.

He added, "This approach will help startups to raise capital and the public to make a quick buck out of investing on such companies."

Mohammadi is of the opinion that naturally, the startup founders will need to have access to an initial source of investment to launch their business, "but for proceeding to further stages of growth they can rely on the public offerings."

"Startups and technology firms are highly profitable entities. Considering their rapid growth rate, SEO is actively pursuing to list the companies on Fara Bourse," he added.

>Question of Valuation

A prerequisite for any company to get listed on the equity market is to go through a valuation process by certified investment banks. On that note, Mohammadi says the valuation must be conducted by an entity approved by the SEO.

He further noted that any company's valuation must be confirmed by the regulator. The SEO has also consulted with the ICT Ministry to weigh the legality of the process.

Asked about the value which certain startups have placed on themselves in statements many have considered ostentatious, Mohammadi responded, "Some startups have announced their estimated values and one has claimed it has become the country's first unicorn startup."

A unicorn is a startup valued at over $1 billion. The term was coined in 2013, the name of the mythical creature chosen to represent the statistical rarity of such successful ventures.

Mohammadi says, "As far as the SEO is concerned, none of these valuations are valid until corroborated by official experts."

He then pointed to the risky nature of investment in startups despite the handsome profit they can potentially yield. He is of the opinion that two factors must be addressed in this regard. One is developing a culture well acquainted with startups and entrepreneurship and the second is formal valuation.

It merits mention that in order for companies to be listed on the stock market, they must meet certain criteria including posting records of a profit-making business in three consecutive fiscals.

If a company's financial statement proves impressive, they have the chance to skip Fara Bourse and be listed on Tehran Stock Exchange, the country's largest equity market.