The wait is nearly over! Kuwait’s Capital Markets Authority (CMA) will be unleashed in March. The CMA will hopefully embark a new era of transparency, accountability, and justice for participants in the Kuwait Stock Exchange. Currently, the CMA is waiting for feedback from fourteen entities on its first draft of the executive rules. The deadline for the feedback is February 15th, and by early March the CMA should have a final draft. The executive rules include 432 articles spread over 121 pages.
One of the most important rules enforced by the CMA pertains to takeovers. We have repeatedly witnessed takeovers in Kuwait that benefit majority shareholders and harm minority shareholders. A new regulation pushed forwards by the CMA forces an acquirer of a stake of 30% or greater to extend its takeover offer to ALL shareholders. The old days whereby only majority shareholders benefit from stake sales will be gone! The CMA will guarantee that all shareholders will reap the benefits of a majority stake sale.
Remember Wataniya Telecom? A majority interest was sold to Qatar Telecom by shareholders led by Kuwait Projects Co. for KD 4.600! At the close of trading on the day the deal was sealed, Wataniya Telecom was trading at KD 3.020- which translates into a KD 1.580 difference. Majority shareholders of Wataniya earned a more than 50% greater return than minority shareholders! Another example is when KIPCO sold 39.2% of Gulf Insurance Company to Fairfax Financial Holdings for KD 0.900 per share and the stock price moved only to KD 0.620, a 45% discount to the offering price.
These takeovers were unfair. They benefited a group more than another. Well, the good news is that these acts will not be permitted by the CMA anymore. We will try to cover different facets of the CMA regulations in future posts and hope
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