WHAT IS “NATIONAL IPO”?
IPO (“Initial Public Offering”) - Initial public shares offering of a company for sale. In this case, the word «original» suggests that the company is introducing its shares on the stock exchange for the first time.
The prefix «national» means that these IPO shares for sale, offered, in the first instance to the population of the country where the issuing companies operate. Typically, National IPO sells exhibited enterprises where the state owns full or controlling interest.
There are several causes of the National IPO. First, the ownership of the successful companies’ shares gives to the citizens the opportunity to profit from their development and growth. It comes as an increase in the share price, and due to the payment of dividends. Second, the People's IPO contribute to the development of the stock market. By giving people the opportunity to purchase the shares of the leading companies, the state expands the investors’ circle. The increasing demand for the shares leads to the growth of their liquidity, which in turn has the positive effect on the development of the stock market.
Thirdly, the funds raised during the National IPO, the state-owned companies can invest in its further development, asset acquisition, modernization and expansion of production. National IPO took place in the different economic conditions in many countries, including the UK, Poland, Russia, Brazil, India and others. For example, in the UK such a program was carried out under the leadership of Margaret Tatcher, Prime Minister, in the late 80's and 90’s. Then the public was offered the shares of the largest national companies such as «British Gas», «British Steel», «Rolls Royce», the electricity sector companies, water and coal industry.
National IPO are usually held in the favorable economic environment. In Kazakhstan, National IPO is planned to hold in the wake of the economic growth.
However, the research shows that the people of Kazakhstan are still not well -informed about the possibility of the investing in securities on the stock market. In the best way, the citizens invest their funds to the deposit in banks or buy the real estate. In the worst - keep their money «under the mattress». At the same time, according to the experts, there are more than 500 million people who own the companies’ shares.
The acquisition of the shares does not guarantee a quick profit, or profit at all. Any financial market, including the stock, is the subject to volatility. It means that buying the shares of a company, the investor has the risk, as the value of the shares can not only increase, but also decrease. The reasons of the decline of the shares value may be different, for example, the drop in demand for goods produced by the enterprise, inefficient management of the company, the unstable political situation in the country, natural disasters, man-made disasters, etc.
According to these risks, as a part of “National IPO”, our state is going to offer the citizens of Kazakhstan the shares of the stable companies that show the positive financial results. In this case, the peace and harmony in the country, the sustainable development of Kazakhstan's economy can expect further increase in the cost of the national companies and, therefore, a good income for the national investors.
Dictionary of the investor:
Share - security granting the rights of its owner (shareholder) to have the profits of the company in the dividend form, to participate in the management of the company and part of the property remaining after its liquidation. Usually, the share is registered security. There are two types of shares: ordinary and preference. To be admitted to trading on a stock exchange it must be completed the listing or to be admitted to trading without listing. Participation of the shares in the auction allows the issuer to attract the most affordable and long-term capital, to increase the company's value, reduce the cost of borrowing.
Investor - a person or organization (including the company, the state, etc.), associated with the risk of committing capital investment aimed at the subsequent profit (investment). The investor buys the shares of the company to multiply its funds for the dividends. It is the main purpose of the investment. In many countries with developed stock market the population buys and sells the shares to raise their welfare.
Investments - long-term capital investments in the economy to generate income. Investments are the integral part of the modern economy. Investments return and generate the revenues only in profitable projects. If the project is unprofitable - investment may be lost.
Issuer - the organization is which issued (already issued) securities for the development and financing of its activities.
Stock market - the integral part of the financial market, where the securities are wrapped.
Exchange is the organization, which provides the regular functioning of the organized market of commodities, currencies, securities and derivative financial instruments. Before exchange was known as the place or building where sales people and brokers, stock brokers for transactions in the securities or commodities were gathering at the same time. Now most of the trades are held in electronic form, using the specialized programs. Brokers in their own interests or the interests of their clients are portrayed in trading systems application for the purchase or sale of a security (currency, goods). These requests can be accommodated counter claims of other traders. Usually the exchange receives commission fee for each prisoner with the help of their deal, and it is the main source of their (the exchange) revenue. Other sources may be membership fees, fees for access to trading, sales of market information.
Dividend – a part of the profits of the joint company distributed for the shareholders after fees payment and the expansion of production to reserves, the payment of interest on the bonds and the remuneration of the directors.
Income payments to the shareholders are made in cash or shares. The amount of dividend for ordinary shares varies and is fixed on the acquisition of the preferred shares. The decision about the size of the dividend for ordinary shares is taken by the general meeting of the shareholders, depending on the financial condition of the company. Dividends of the shareholders are paid till the Company will proceed to the payment of dividends to the holders of the ordinary (voting) shares.
Volatility - statistical financial measure of the tendency of the price volatility. It is key financial measure and the concept of the management of financial risk, which is a measure of the risk of a financial instrument over a given period of time.
Liquidity - the ability quickly to buy or sell the shares without a significant price change. Typically, the shares of the large companies with a large number of shares in circulation and popular among investors, have high liquidity. Low liquidity means that shareholders sell them rarely, and it limits the possibility of the new investors to buy the shares.