The giant company is estimated to worth 3,500 trillion rials ($12 billion) with the government holding 18% stake.
According to notices seen on the IPO website, shares were offered in two small blocks comprising 1% and 2% of the total, respectively, on Saturday and Sunday.
The remaining shares will be offered on Wednesday in a bigger chunk of 15% . The smaller chunks are fully in cash while potential buyers of the majority block will have the option of paying in long-term installments.
In addition, the bigger block is priced higher than the smaller peers. The 1% block includes 2.87 million shares each worth 9,960 rials, almost 8% lower than the price seen on the company’s ticker on the bulletin board of the Tehran Stock Exchange.
Each share in the big block is tagged at 12,950 rials, which is 16% higher than the current ticker price. The payment mechanism explains the higher price. The block comprises 43.05 million shares worth 557.49 trillion rials ($1.9b) and potential buyers can pay 70% of the price in 6-month installments over four years.
Block trade typically involves a large number of equities or bonds traded at an arranged price between two parties. This is sometimes done outside the open markets to lessen the price impact. Individual investors are rarely due to the sheer size of block trade.
Changing Times
The government is striving to realize a portion of its financial needs via large divestments. However, unlike the good performance last year when the government tapped into the historic rise of share prices, income from share divestment so far has been close to zero this year.
Total government income from share sales exceeded 320 trillion rials ($1.1b) last year. The March 2021-22 budget says the government must make 950 trillion rials ($3.2b) by selling shares.
The IPO insists block share policy is convenient and was decided based on the consideration that retail offers of shares is to the detriment of the bourse as it negatively impacts the flow of liquidity in the crisis-hit market.
Retail offer of shares is indeed difficult, if not impossible, under the current market conditions where demand is declining and money is flowing out of the market at extra speed.
Block sale of shares in Iran has been tried and tested time and again only to fail simply because under the dire economic conditions buyers simply are unable and unwilling to pour millions of dollars in such blocks.
However, the head of IPO Hossein Qorbanzadeh still has high hope in the success of block shares this time around. He said last week his organization has started talks with potential buyers and “competition for purchasing blocks would be intense”.
PGPIC is the biggest consortium of Iranian petrochemical producers. With a market capitalization worth 3,105 trillion rials ($10.7b), the giant petrochemical holding is the largest company listed on the TSE.