Mohammad Javad Azari Jahromi, the Minister of Communications of the twelfth government, who had promised to create five unicorns in the country simultaneously with the start of his work in this ministry, announced in the last months of his activity in the Ministry of Communications (Autumn 2020) in a significant confession that exchange rate fluctuations had eroded the value of startup companies, and that if the exchange rate had remained stable, the country would have had five unicorns by now.
He also stated for the first time that one of the reasons for the slow entry of large startup companies into the stock market was the concerns of some institutions about the growth of companies that were not dependent on government entities. According to his statements, concerns about having a major capitalist in the country, which had been a traditional issue, ultimately slowed down the process of startup companies entering the capital market. It seems that this problem, in fact, this concern, has been addressed in the new guidelines for the entry of companies active in the digital economy into the stock market.
According to IDEA, Reza Khanaki, the CEO of Azki Capital, unlike the opinions of companies planning to enter the stock market, considers these new guidelines as progressive and with fundamental changes. In his view, one of the fundamental changes in these guidelines can be seen in Article 4, which reduces the time it takes to obtain security approvals from competent authorities for a startup company.
According to him, under Article 4, the stock exchange is obliged to take action regarding the qualification inquiry of board members, the CEO, major shareholders, and matters related to money laundering from competent authorities. Furthermore, this article has a provision stating that if no response is received from the competent authorities within two months of receiving the qualification inquiry, it is considered as not hindering the continuation of the acceptance process for the company. He emphasizes that specifying the response time for qualification inquiries solves many of the problems associated with the entry of startup companies into the stock market.
Although Khanaki expresses the expectation that a new law should be written from scratch for the entry of startup companies into the stock exchange rather than updating an old guideline, he still insists that fundamental changes are seen in these guidelines, which he attributes to TAPSI’s entry into the stock market. In this regard, he says, ‘In my opinion, these guidelines have been written based on the experience of TAPSI entering the stock market. In fact, they have tried to eliminate some of the obstacles that TAPSI faced when entering the capital market. For example, in the new guidelines, the initial offering can be in the form of increasing capital from the right of precedence, which, if made mandatory for TAPSI, would change the conditions of a business differently.’ He continues, ‘One of the reasons why startups in Iran have not grown is that their founders cannot exit their shareholding or sell part of their shares. However, in the new guidelines, these conditions have been facilitated in such a way that founders can more easily sell some of their shares and benefit from this sale, which changes the operating conditions of a business differently.’
In this regard, Amir Hamouni, the former CEO of over-the-counter, also assesses the new guidelines positively. According to him, under the new resolution, knowledge-based, technology, and creative companies have also been added to the scope of the guidelines. In addition, according to the new regulations, two specialist experts are added to the Acceptance Committee upon the CEO’s proposal and the approval of the Stock Exchange’s board of directors, with voting rights.
Hamouni also considers the most important change in these guidelines to be the removal of barriers to obtaining security clearances from competent authorities. He tells ‘Donya-e-Eqtesad’: ‘In addition to simplifying and expanding the scope of the guidelines, the most significant advantage of the new regulations is the reduction of bureaucratic complexity in the acceptance process by imposing a two-month time limit for receiving responses to qualification inquiries regarding major shareholders, board members, and CEOs of companies from competent authorities, as stated in Article 4 of the guidelines. In the previous period, this had turned into a time-consuming obstacle to the acceptance of startups.’
He continues: ‘Furthermore, delegating some decisions from the higher authority to the CEO of the Stock Exchange (Article 5, Paragraph 1 regarding permission for share transfers) and the Acceptance Committee (Article 5, Paragraph 3 regarding approval of the capital increase method of the company) is an appropriate procedure that can also be used in other matters of stock exchanges and financial institutions.’ In his view, given the limited number of startups offered in the market over the years since the initial guidelines were approved, the participation of companies, regulatory authorities, and investors is vital for the efficiency and vitality of these guidelines. He emphasizes that, on one hand, improving transparency and developing corporate governance for knowledge-based businesses and other startups is a necessary step that any business seeking to enter the stock exchange today and, in the future, must take. Hamouni believes that the regulator’s attention to issues related to the interpretation and implementation of these guidelines is essential for accelerating the entry of startups into the stock exchange.
He explains in this regard: ‘Among these cases, we can point to balancing supervisory oversight with the efficiency of guidelines, avoiding prejudice, and establishing regulations that are clear, non-contradictory with the principle of knowledge-based economic development, and utilizing diverse auction methods and conditions that are proportional to the existing risks to prevent interruptions in offerings.’
Although the excitement around the entry of innovative and technological companies into the country’s stock market intensified during the days of the pandemic when the stock market indices were consistently green, and now, with the majority of the stock market indices being in the red, this excitement has turned into ashes, entering the capital market for startup companies remains a ray of hope on days when there is neither foreign investment in the country nor a willingness among domestic investors to enter this sector.
In the end, it seems that with more diligent work on these new guidelines and reducing their ambiguities before their official announcement, the companies whose names have been heard repeatedly over these past years in connection with their desire to enter the stock market could become symbols on the stock exchange board. In fact, one can hope that the entry of new and genuine players in the IT industry, who have managed to change the landscape of this industry as well as the entire economy of the country over the past decade, will unleash tremendous energy in the stock market and the country’s information technology sector, taking both sectors to a higher level than the current situation. On the one hand, with these entries, the Iranian stock exchange can become more reliant on technology-oriented companies for further growth, similar to global stock exchanges. On the other hand, information technology companies can benefit from the stock exchange capital in the absence of foreign investors and government support.
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