Promoting IPOs in Turkey

Author Name: 
Huseyin Erkan, Chairman & CEO, Istanbul Stock Exchange

Capital markets facilitate fund raising opportunities for businesses which aspire to invest for sustainable growth in a highly competitive environment. Public offerings play a pivotal role in ensuring that businesses gain international competitive advantage as well as global recognition.

Economic activities are realized by family businesses to a great extent in Turkey, as is the case in the rest of the world. Once such companies reach a certain size, they are no longer mere family businesses but become the heart and soul of the national economy, an essential constituent of the national wealth, and a valuable engine of employment. Therefore, it is very important to convert these constituents of national wealth into sustainable companies that outlast the current generation. We have always emphasized the importance of establishing a corporate culture and, fostering growth, and both of these goals are best realized through institutionalization, in other words corporate governance.

In spite of the fact that capital markets offer a wide range of opportunities for companies, including low-cost funding, institutionalization, international and local visibility, liquidity for shareholders, and credibility, many of the leading Turkish companies do not yet have access to the important facility of trading on the Istanbul Stock Exchange (ISE).

We initiated the Initial Public Offering (IPO) Campaign in cooperation with the Capital Markets Board of Turkey (CMB), the Union of Chambers and Commodity Exchanges of Turkey (TOBB), and the Association of Capital Market Intermediary Institutions of Turkey (TSPAKB) on August 7, 2008. The Campaign is aimed at ensuring that companies have access to the opportunities offered by capital markets, raise the funds they need for growth, and assure their sustainability by going public.

We aim to attract the 1,000 largest Turkish companies to the Istanbul Stock Exchange  as well as to increase the awareness of capital markets with the SMEs through a special market segmentation with many advantages. Also, we would like to increase the number of companies listed on the ISE from its current standing of 339 to over 1,000 by 2023, when we will be celebrating the centennial anniversary of the Turkish Republic.

The first all-embracing occasion in which public offerings were being encouraged in Turkey was the IPO Istanbul Summit held, in Istanbul on May 6-7, 2010. The Summit brought together over 2000 top level executives from 514 leading Turkish companies that are not yet traded on the Istanbul Stock Exchange. Throughout the Summit, the ISE convened all the parties involved in initial public offerings in an exhibition-like environment, where they had the opportunity for face-to-face contacts. Brokerage companies authorized for public offerings, independent audit firms, law firms, private equity funds, domestic and international institutional investors, consultancy firms, and sectoral associations were invited to take part in the Summit by opening stands, organizing workshops, and holding one-to-one meetings with companies, and thereby directly informing the executives of companies which have a potential to go public about their services.

A similar event will be held this November in Bursa, home to some of the leading Turkish industrial companies, mainly operating in the textile, automotive, agricultural and machinery sectors.. We are also planning to hold IPO Summits in two other cities next year.

The Istanbul Stock Exchange has already started to harvest the fruits of the Initial Public Offering Campaign, which has been underway for more than two years.

During 1990-2000, an average of 24 companies went public yearly, but this average fell to 6 companies for the period of 2001-2009. During the first ten months of 2010, 16 companies went public, with 12 applications currently under review. We expect more companies to start trading on the ISE next year. Additionally, it is also worth noting that during the first ten months of 2010, ten corporate bonds were offered to public.

The dynamism brought to the market by the IPO Campaign has influenced foreign companies as well as we have received listing applications from foreign companies for the first time. We expect the first foreign company to start trading on the ISE in the last months of 2010.

In 2010, the ISE also introduced a variety of new financial instruments. Non-voting shares and warrants started trading on the ISE. On another front, the corporate bond market is showing signs of revival as a result of decreased domestic borrowing requirements.

I would also like to add that a new market, namely “Offerings Market for Qualified Investors” has been established in the ISE. In this market, the corporate bonds of companies traded on the ISE Stock Market will be issued for trading by qualified investors only, without preparing a prospectus or circular.

We expect to continue the promotion and awareness activities regarding initial public offerings in cooperation with the Capital Markets Board of Turkey (CMB), the Union of Chambers and Commodity Exchanges of Turkey (TOBB), and the Association of Capital Market Intermediary Institutions of Turkey (TSPAKB) in various cities with the participation of chambers of industry and commerce, this will create the synergy to accelerate the development of Turkish capital markets. In this process, the ISE also plans to initiate an “Investor Campaign”, aimed at ensuring that savings are attracted to capital markets.

About Huseyin Erkan

Prior to his recent appointment as the Chairman and Chief Executive Officer of the Istanbul Stock Exchange by the Turkish Government, Mr. Erkan was the Chief Adviser to the Board of Konya Sugar Company; Turkey’s largest private sector group of companies in sugar refining and agricultural products. In this position, Mr. Erkan was commissioned to restructure the group’s activities. 

Mr. Erkan served as the General Manager of Ticaret Securities for a short period following his resignation from the Istanbul Stock Exchange as Executive Vice Chairman in 2006. He had been responsible for the International Market, International Relations and Human Resources among other responsibilities at the Istanbul Stock Exchange (ISE) for twelve years, and was also a Board Member of the ISE Settlement and Custody Bank (Takasbank). 

During his employment at the ISE between 1994 and 2006, Mr. Erkan established the International Relations, Research and International Market departments as well as the Federation of Euro-Asian Stock Exchanges (FEAS) which currently has 32 stock exchanges as members. Mr. Erkan was promoted at the ISE as Executive Vice Chairman in 1995. 

During his term of office at the ISE, Mr. Erkan had additional responsibilities as a member of the Executive Board of the Turkish-Japanese Business Council; Co-Director of projects with the OECD in SME financing and best practices for developing stock exchanges; representative of the ISE at FEAS and other organisations such as the International Organisation of Securities Commissioners (IOSCO), the World Federation of Exchanges (WFE), in addition to being the Joint Project Coordinator of the South East European Cooperative Initiative (SECI) to implement a cooperation project for the securities markets in the Balkans. He also initiated a project for the cooperation of securities markets of the Islamic countries in COMSEC Subcommittee under the Organisation of the Islamic Conference (OIC). 

Early in his career, Mr. Erkan gained extensive experience in the transportation, petroleum and manufacturing sectors. He entered the capital markets in 1989 as a Research Analyst working with foreign institutional investors. Subsequently, he worked as a Research Analyst on a retainer basis for Bankers Trust after working with various companies in the capital markets of Turkey between 1992 and 1993. Mr. Erkan became a partner and Deputy Chairman to Tezal Securities in Istanbul for two years and left the company prior to joining the Istanbul Stock Exchange (ISE) in 1994. 

Mr. Erkan graduated from New York University Stern Business School with a B.S degree in Economics (1981) and an MBA in the fields of International Business and Finance (1984) with a thesis project on currency risk management at the United Nations Development Program (UNDP).