IPO Welcomes Decision on Justice Shares

EghtesadOnline: The initiative to ease restrictions on trading the so-called Justice Shares will allow Justice Shares worth 3,000 trillion rails ($18.75 billion) to be offered Iran’s stock market, head of the Iranian Privatization Organization said.

News ID: ۷۴۹۹۴۵

30 April 2020

Briefing reporters on the government’s new plan, based on which the shares will be tradable in the stock market, Alireza Saleh said the stock market will grow exponentially after the shares are completely vested.

The process commenced Wednesday soon after the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei approved a government request to transfer the ownership of shares to the people, IRNA reported.

Saleh said holders of the shares have one month to decide on its ownership, referring shareholders to special electronic platforms to determine the status of the ownership of their shares. More than 50,000 applicants registered by Wednesday noon.

Justice Shares are shares of government-owned companies that were given to the six lowest income deciles of Iranians ten years ago. They could not trade the shares and received a small part of the dividends in the last two years.  Saleh said the government has so far paid 120 trillion rials ($750 million) in dividends to the shareholders.

More than 49 million Iranians have Justice Shares and estimations suggest that the value of each share has grown eleven times.

According to Saleh, shares of 35 million people were tagged between 4.8 to 5.3 million rials and the rest were worth 10 million rials at the time of issuance a decade ago.

Shareholders now have the option to either directly gain the ownership of their shares and sell it in the stock exchange, or let the investment companies manage their portfolio as in the past.

Economy Minister Farhad Dejpasand has called on the people already under economic distress due to the coronavirus pandemic and other ills, not to rush in selling their shares.

Although many are unlikely to pay heed and sell after the process is complete, it seems the government does not plan to allow vesting of shares in one phase given the current capacity of the stock market.

Head of Principle 44 Commission of the Majlis, a legislative body in charge of overseeing the privatization process as per the Principle 44 of Iran’s Constitution, said the measure will be implemented gradually over five years

"This will help marketability of the shares and prevent harm to the stock market,” Hamidreza Fooladgar was quoted as saying.

The Justice Share portfolio includes 49 state-owned companies in the auto, metal, mining, and agriculture, petrochemical and banking sectors. A total of 35 companies are already listed with the stock market and another 14 that are planning an initial public offering.

By Decree

Late on Tuesday, the Leader in a decree agreed to a request by President Hassan Rouhani to vest Justice Shares to owners and lift bans on their trade in the stock market.

Ayatollah Khamenei recalled the significant role of Justice Share scheme in promoting social justice and empowering the low strata

He called on the High Council of Securities and Exchange to approve rules to transfer the shares to owners and obliged administrative bodies to abide by the HCSE decisions.

Appreciating the Leader’s approval, Rouhani in a letter described the move as “a big stride toward involving people in the economic sphere,” expressing the hope that it will help boost the stock market that has been shooting upwards over the past several weeks

Outlining the performance of his government in protecting the rights of the people to own their shares, Rouhani said the government had set up a data bank for collecting shareholders’ information and started paying dividends from 2016.

“Now, the government is prepared to pave the way for realizing the people’s ownership and control over their shares,” Rohani said in his letter to the Leader

The long-awaited imitative comes at a time when the stock market is at its peak. The benchmark of Tehran Stock Exchange grew more than 200% during the last fiscal year (March 2019-20) and the TEDPIX has gained close to 70% since the beginning of the year.  This has attracted retail investors in droves with a lot of money.

Despite concerns of market analysts warning about unjustified growth in the stock market indicators and an imminent bubble burst in share prices, government officials continue to encourage the people to invest in the market and reject the notion that this could be risky.

The government has a plan to divest its remaining shares at 18 state-run companies and has said that it will accelerate the privatization plan through the stock market.

Justice Share scheme is traced back to 2007, when the former president Mahmoud Ahmadinejad decided to speed up the privatization of government firms by offering shares to low-income families, starting with the poorest.

The scheme was launched in line with amendments to Article 44 of the Islamic Republic Constitution that requires the government to privatize the economy.

Another aim of the scheme was to make share ownership common among ordinary citizens.

The source of dividends on the shares became a subject of hot debate as experts and analysts called them "shares without profit", and said it was another “populist move”  pursued by the Ahmadinejad administration.