Alternative Method for Going Public Enters into Force

New Development

The Communiqué on Companies whose Shares will be Traded on the Venture Capital Market (“Communiqué“) entered into force through publication in the Official Gazette dated 18 May 2023.

The Capital Markets Board (the “CMB“) published the Draft Communiqué on Companies whose Shares will be Traded on the Venture Capital Market (“Draft Communiqué“) on 20 September 2022. You can access our newsletter dated 3 October 2022 regarding the Draft Communiqué here.

What Does the Communiqué Regulate?

The Communiqué introduces the possibility of selling the shares of a joint stock company to qualified investors through capital increase without offering these shares to the public. Accordingly, joint stock companies will be able to go public by way of selling their newly issued shares to qualified investors without publicly offering these shares.

What has Changed?

Principles Regarding Sale

• Companies that want to go public but do not want to offer their shares to the public will be able to sell these shares to qualified investors.
• For this purpose, a joint stock company will first obtain the approval of the CMB and bring its articles of association into compliance with the capital markets laws. It will then make a second application to the CMB for approval of the prospectus specified in the Communiqué.
• The minimum thresholds required in the Draft Communiqué have been increased by the Communiqué. Accordingly, to be eligible to be traded on the Venture Capital Market (the “VCM“), a company’s total assets must be at least twenty million Turkish Liras, its net sales revenue must be at least ten million five hundred thousand Turkish Liras and its registered share capital must be at least ten million Turkish Liras according to the company’s audited financial statements relating to the financing year preceding the year in which the shares of the company are listed on the VCM.
• The newly issued shares can only be sold through the stock exchange and will be traded on the VCM. Shares held by existing shareholders of the companies that are not newly issued through capital increase will not be eligible for conversion into tradeable shares.
• No greenshoe option will be available for listings on the VCM.

Principles to be followed after the sale

• The shares of the companies that are listed on the VCM cannot be offered and sold to the public during the two-year period following the year in which they started to be traded on the VCM.
• Companies whose shares will be traded on the VCM will be obliged to apply to the CMB for a public offering through capital increase in order to ensure that their shares are traded in other markets of the stock exchange within five years. If the prospectus is not approved by the CMB or the application is not made in due time, the shares will be deemed to have been removed from the VCM by the stock exchange.
• The shares remaining after the exercise of pre-emptive rights can only be purchased by qualified investors.

Liabilities and Exemptions

• The companies whose shares will be traded on the VCM will be considered companies whose capital market instruments are traded on the stock exchange and/or other organized marketplaces in terms of financial reporting and independent audit.
• The companies whose shares will be traded on the VCM will be exempt from the obligation to prepare three-monthly and nine-monthly interim financial reports.
• If a company whose shares are traded on the VCM goes through a merger or spin-off transaction, its shares will be automatically deemed to have been removed from the VCM by the stock exchange.
• The companies whose shares are traded on the VCM will not be subject to the Communiqué on Corporate Governance No. II-17.1, the Communiqué on Mandatory Tender Offer No. II-26.1 and the Communiqué on Material Transactions and Exit Rights No. II-23.3. These companies will also not be able to repurchase their own shares.

Conclusion

The Communiqué enables listing on the stock exchange without going through a public offering process. Although the sale of shares under the Communiqué is similar to a public offering, the Communiqué provides lighter obligations for post-trading life of company shares compared to a public offering.

Tagged with: Esin Attorney Partnership, Muhsin Keskin, Caner Elmas, Ozcan Serhat Cengiz, Cennet Sena Güney, Banking, Finance & Capital Markets