IPO Announces Launch of ETF for 4 Refineries

EghtesadOnline: The Iranian Privatization Organization published a notice Tuesday outlining details about subscription of government shares in four refineries via an exchange-traded fund.

News ID: ۷۵۰۸۰۹

26 August 2020

It called on the public to subscribe for the ETF units starting Wednesday (August 26). Subscriptions will be accepted over two weeks ending Sept. 9, according to the notice on the IPO website.

The ETF, dubbed “First Refinery”, holds government shares in four major oil refining companies, namely Tehran Oil Refining Company, Esfahan Oil Refining Company, Tabriz Oil Refining Company and Bandar Abbas Oil Refining Company. The government owns 20% of shares in each refinery.

As per the notice, all Iranians can subscribe to ETF units using their national ID number. There is no age limit for buyers. Legal entities and foreign nationals cannot subscribe.

ETF units are priced based on average final prices of the ticker symbols of the four refineries on the Tehran Stock Exchange bulletin board on Tuesday. The price is subject to 20% discount to encourage more people to buy.

The pricing method was approved by the Cabinet on Monday. Earlier it was announced that prices would be based on the average final price of shares displayed on TSE’s bulletin board for one month to the day prior to the subscription date.

It appears that the government has tweaked the pricing formula because of huge recent volatilities in the share market.

The new ETF is the second of its kind. In May the government sold shares in three banks and two insurance companies via the first ETF. At that time, those interested could buy ETF units worth up 20 million rials.

Ceiling Raised

However, the government has increased the ceiling for purchasing refinery ETF units to 50 million rials for first-time buyers. Buyers who previously bought 20 million rials of the bank-based ETF can now purchase units of the refinery ETF by maximum 30 million rials.

First timers can buy a maximum 500 units of the refinery ETF each priced at 100,000 rials.

Those who have trading codes can subscribe for shares via brokerage firms and ordinary buyers can do so via selected banks.

Selling shares via ETFs is part of the government’s effort to raise funds for budgetary needs. The government has announced that it will soon divest shares in assorted companies via three ETFs.

The first ETF was inaugurated in May with 17% of government stakes in Tejarat Bank, 17% in Bank Mellat, 18.32% in Bank Saderat Iran, 17.34% in Alborz Insurance Company and 11.44% in Amin Reinsurance Company. The government then made 58.86 trillion rials ($260 million).

Future ETF

The government also has plans to divest shares in giant auto and metal companies through a third ETF. The third fund is expected to hold 12.05% of government stakes in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company and 14.04% in Iran Khodro and 23% in SAIPA (the two main domestic carmakers).

Officials say the moves are in line with government efforts to involve the people in the economy and at times described it as “realization of privatization goals”. However, independent observers have said the scheme is not privatization per se, arguing that after selling its shares in state-run companies, the government would still have control over the ETFs holding them.

The Majlis Research Center, the parliamentary think tank, said earlier the government is actually pursuing two goals: generating income by divesting ownership of its property and not losing control over it.