Issuance of securities in Turkmenistan: advantages for issuers and investors03.08.2023 | 16:35 |
To launch a new product, expand the geography of supplies or modernize production, companies often need additional financing. One of the options to attract money is to issue your securities and find investors through the exchange. ORIENT, together with the Ashgabat Stock Exchange (ASE), tells how this can be done in Turkmenistan today.
Differences between stocks and bonds for business
Small and medium-sized enterprises can borrow money from the bank. But in some cases it is more profitable to issue (issue) shares or bonds.
By issuing shares, you offer investors a stake in your company. They will be able to count on dividends — usually part of the profit is spent on this. You do not guarantee investors income, but they will become co-owners of your business and will have the right to influence its development.
The bonds are actually your promissory notes. By issuing bonds, you borrow money from investors, and in return you promise to pay them interest — coupon income. The plus is that, unlike a loan or a loan, you yourself determine how much you are willing to pay bond buyers and how often you will do it. This way of raising money is more predictable than stocks. Therefore, it is easier for both business owners and investors to decide on it.
In addition, in both cases, your company needs to register as a joint stock company.
Which companies are more profitable to issue securities
As practice shows, representatives of various business sectors successfully enter the stock market: manufacturing enterprises, financial and IT companies, shops, cafes and restaurants. But the issue of securities is suitable only for a mature business that has existed for more than one year and has clear development plans.
It is important that both investors and the company itself understand for what purposes the financing will be used and at the expense of what income they will pay money to shareholders or bondholders.
Securities, stock exchange — sounds very difficult. Wouldn't it be easier to take out a loan?
It all depends on the circumstances, but if you decide to raise money through the exchange, it may be cheaper than loans. In addition, the issue of securities will give you more financial freedom and prospects for development.
— You decide for yourself what kind of reward investors will receive. You need to pay coupon income on bonds, and dividends on shares, but you determine their amount yourself.
— No deposit needed. Business loans are usually issued on the security of real estate, transport or equipment, and the issue of securities of the company does not require expensive property and does not need to transfer the rights to it to the bank.
— The raised money can be used at your discretion. Loans and borrowings are most often targeted — for example, for the development of production. And you have the right to dispose of the money earned on the stock exchange more freely.
— The circle of investors is much wider than creditors. Any investors, including private investors, can buy stocks and bonds. There are a lot more of them than banks.
— Publicity and PR. The company's entry on the stock exchange is a chance to attract attention to its business. The more famous the company and its products become, the easier and cheaper it will be to attract financing through the exchange in the future.
What will happen if the company is unable to pay coupon income on bonds or dividends on shares?
Issuers of bonds and shares have different responsibilities to investors.
In the case of a bond issue, the company is obliged to pay the coupon income according to the schedule and at the time of repayment — the principal debt, that is, the nominal value of the security. If the issuer does not have enough money for the planned payment, then the following option is possible:
When financial difficulties are temporary, and the company expects to improve its situation in the near future, it has a chance to negotiate with bondholders on debt restructuring. That is, to change the payment schedule — to postpone, temporarily reduce or stretch them.
In case of issue of shares, the issuer pays investors in accordance with the decision of the Shareholders' Meeting to spend part of the company's profits on dividends.
How to issue securities in accordance with the rules of the ASE?
Shares can be issued for at least 350 thousand manats and in the amount of at least 5000 pieces.
The requirements for bonds are lower. The total amount of the bond issue must be at least 35 thousand manats and in the amount of at least 100 pieces.
The company must meet several criteria:
— The company must be registered in accordance with the procedure established by law and work for at least one year. At the same time, the company should not be in a state of bankruptcy, liquidation or reorganization.
— The amount of the company's own funds should not be less than 1,050,000 manats. At the same time, it is desirable that the turnover and profit grow. And if the company took out loans, there should be no delays on them.
— At the time of Listing, the company must be transformed into an open joint stock company.
The securities market, as an integral part of the financial and credit system, is an object of state regulation, the purpose of which is to protect the interests of investors from illegal actions.
Stock exchanges are founded to trade securities, expand investment opportunities and intensify export volumes.
JSC "Ashgabat Stock Exchange" was founded in 2016 and acts as a leading organization in the formation of capital markets in the country.
The securities market is an opportunity for issuers to attract additional funds for the development of their business, and for investors (individuals and legal entities) to preserve and increase personal savings or available funds. The ASE operating in Turkmenistan is currently under development.
Thus, for the first time in the history of the stock market of Turkmenistan, in 2023, issued corporate bonds totaling 16 million manats were registered. They were released by OJSC "Mary-Deri-Aýakgap" and OJSC "Lebapetönümleri". To date, active work is underway to place these bonds.
The Ashgabat Stock Exchange invites interested companies to consult on the issue of securities (shares and bonds), as well as their placement on its trading platform.
For more information and advice, you can contact the Ashgabat Stock Exchange:
Contact phone numbers: 46-86-05, 46-88-05.
Consultant: (+993 62) 60-94-54.