SEO Wants Large Share Offers via Block Trade

EghtesadOnline: The Securities and Exchange Organization, fearing fresh market volatility, has banned listed companies from offering shares on a large scale.

News ID: ۷۸۷۸۰۳

11 April 2022

“If companies want to offer large numbers of shares, they better go for block trade,” the Securities and Exchange News Agency quoted Mehdi Parchini, the SEO Head of Market Supervision, as saying.

“The SEO has banned retail offer of such shares to help protect the interest of retail investors,” he added, expressing concern that excessive share offers could lead to a new bout of volatility.

The move came after the central bank instructed lenders to divest their stocks in affiliated companies. Parchini reiterated that such divestment must be done in wholesale and in block sales.

Block trade typically involves a large number of equities or bonds being traded at an arranged price between two parties. They are sometimes done outside the open market to lessen the impact on the security's price. Due to the size of such trade, individual investors rarely involved.

However, big stockholders prefer retail offer of shares due to the unsuccessful experience of block trade in the past. A glance at past instances of block offers shows that it was tried and tested several times only to fail simply because potential investors are unable or unwilling to spend millions of dollars in such trade.

In one known case, the plan to sell the residue of government shares in Persian Gulf Petrochemical Industries Company (PGPIC) fell flat. The company had offered three blocks of shares including two small blocks comprising 1% and 2% and a big one with 15% of the government’s stake.

The government has pledged to take measures to lift the bourse and protect the interest of millions of retail investors that have lost their hard-earned saving in the wobbling share market since the summer of 2020.

Despite some signs of recovery in recent weeks, the share market for long has been grappling with a bearish trend that began after the bubble burst unleashing non-stop dumping of shares.

At the time, the main index of Tehran Stock Exchange, TEDPIX, shot up fourfold in less than five months (March-August 2020) before losing almost half its value soon after.