On 20 November 2015, Borsa Istanbul A.Ş. (Borsa Istanbul) published the final version of Listing Directive (Listing Directive) which entered into force as of today. Listing Directive is part of the reorganization of Borsa Istanbul in conjunction with the implementation of the new trading platform – BISTECH, which has been developed in cooperation with NASDAQ.
Unifying listing provisions for the sub-markets of Borsa Istanbul under a single piece of regulation which were previously regulated under 14 different circulars, Listing Directive is introducing substantial changes in the structure of Borsa Istanbul and its sub-markets. In addition to such substantial changes, various ancillary amendments have been made in order to align the listing provisions with the new structure envisaged by Listing Directive. Furthermore, various changes in terms of timing and structure of the listing procedures have been implemented. Borsa Istanbul is further authorized to issue Implementation Guidelines to further regulate the rules of conduct for Borsa Istanbul and its sub-markets. Within entry into force of Listing Directive as of today, 14 above mentioned circulars are abrogated.
Within entry into force of Listing Directive, a new market structure is introduced. In this respect:
- Two new sub-markets are established under the Equity Market (i) BIST Star, and (ii) BIST Main (Yıldız Pazar and Ana Pazar) abrogating the National Market and Second National Market.
- A brand new sub-market is established under the Equity Market for qualified investors titled the Equity Market for Qualified Investors (Nitelikli Yatırımcı İşlem Pazarı).
- The names of Watchlist Companies Market and Collective Products Market under the Equity Market are respectively changed into Watchlist Market (Yakın İzleme Pazarı) and Collective and Structured Products Market (Kolektif Yatırım Ürünleri ve Yapılandırılmış Ürünler Pazarı).
- The name of the Free Trade Platform is changed to Pre-Market Trading Platform (Piyasa Öncesi İşlem Platformu).
Pursuant to Listing Directive, current shares listed on the National Market and Second National Market will be transferred to BIST Star and BIST Main by taking into consideration the market value of the free-float shares.
Accordingly, as per the public disclosure of Borsa Istanbul dated 20 November 2015;
- 117 stocks of 115 companies will be listed on BIST Star;
- 185 stocks of 185 companies will be listed on BIST Main;
- 7 stocks of 2 companies will be traded on BIST Star (two) and BIST Main (five).
Unlike the previous regulation, Listing Directive requires all capital market instruments that are traded on the Equity Market or Debt Securities Market to be listed on the relevant markets (save for the capital market instruments that are traded on the Pre-Market Trading Platform). In addition, Listing Directive regulates listing and delisting conditions and requirements for all markets established under Borsa Istanbul.
Together with the new market structure, Listing Directive,
- Modified listing requirements and delisting conditions;
- Introduced listing of Special Purpose Acquisition Companies (SPAC);
- Established the Equity Market for Qualified Investors;
- Facilitated dual-listing;
- Modified the structure of Emerging Companies Market (Gelişen İşletmeler Piyasası); and
- Amended requirements for companies to remain listed.
New listing requirements under Listing Directive
In relation to listing on BIST Star and BIST Main, Listing Directive replaces the requirement to obtain profit before tax with the requirement to obtain EBITDA, as a quantitative listing criterion. However, in respect of financial sector companies, net income will be taken into consideration in lieu of the EBITDA obtained. For the minimum equity requirements, instead of a specific amount, Listing Directive requires companies to maintain a specific equity to capital ratio. In addition, requirement for the companies applying for listing of their shares on BIST Star or BIST Main to maintain at least three years from incorporation is reduced to two years. Companies applying for listing on BIST Star or BIST Main must also fulfil all the criteria falling into the same group as listed below.
Pursuant to Listing Directive, shares of the companies included in BIST 100 Index will be listed on BIST Star, regardless of their minimum market value of publicly offered shares. In addition, as a free float requirement, (i) shares held by the investors who subscribed for 10% or more (which was 5% under the previous regulation) of the share capital of a company following an initial public offering (IPO), and (ii) shares purchased by the members of the board of directors or the senior management of a company will not be included within the calculation of the publicly offered shares to capital ratio, and the market value of publicly offered shares.
New approach for lease certificates and debt securities
Unlike the previous regulation, Listing Directive does not require a minimum issuance requirement for listing of lease certificates (sukuk) on the Debt Securities Market. In addition, Borsa Istanbul enables listing of lease certificates offered both (i) through a public offering, or (ii) to qualified investors, without seeking any further conditions, provided that the prospectus (izahname) or issuance certificate (ihraç belgesi) is approved by the Capital Markets Board (CMB). For the listing of debt securities that are offered through a public offering, Listing Directive introduces the requirement to maintain equity to capital ratio greater than one. Listing of debt securities that are sold to qualified investors will be made without making any further evaluation by Borsa Istanbul, provided that the issuance certificate is approved by CMB and the sale is conducted to qualified investors.
Extended rights for Borsa Istanbul
If any adverse issue is detected regarding the reliable, transparent, efficient, stable, fair and competitive operation of Borsa Istanbul, Listing Directive authorizes the board of directors of Borsa Istanbul to (i) reject the listing applications of the companies, (ii) list companies on a market other than the market that the companies applied for and fulfilled the criteria to be listed on, or (iii) delist companies from their currently listed markets and monitor them on the Watchlist Market. Furthermore, except for the listing applications for warrants, certificates, ETFs, and capital market instruments to be traded by qualified investors, members of the board of directors, general manager, and shareholders having management control of the companies applying for listing must certify by an independent lawyer report that they have not been (i) convicted of certain crimes (e.g. money laundering, fraud, insider trading, market manipulation), and (ii) sentenced to imprisonment for five years or more. In addition, Borsa Istanbul may reject listing application of a company which has suspended its operations for more than three months in the previous two years (which was one year under previous regulation).
New delisting conditions
The board of directors of Borsa Istanbul may resolve to delist a company if (i) the independent audit reports of the last three years (which was two years under the previous regulation) include any negative opinion or the independent auditor abstains from issuing an opinion, (ii) non-commercial receivables from related parties to total assets ratio exceeds 50% on the balance sheets of last three years, and (iii) the operations of a listed company are suspended for more than one year (which was three months under previous regulation) without a reason which may be found acceptable by Borsa Istanbul.
Special purpose acquisition companies
As an innovation, Listing Directive introduces special listing requirements for SPACs which are incorporated for the purposes of merging into non-public companies following an IPO to finance the merger transaction. For the initial listings of SPACs, (i) such companies must have at least TRY 200 million market value of publicly offered shares, (ii) the publicly offered shares to paid-in or issued capital ratio must be at least 50%, (iii) 80% of the publicly offered shares must be sold to the institutional buyers, (iv) founders, members of board of directors and managing personnel must hold at least 10% of the shares representing the share capital of the SPAC and (v) founders, members of the board of directors and managing personnel must submit an undertaking to Borsa Istanbul restricting their rights to sell the shares held before the IPO until the merger and within 12 months following the merger. SPAC shares may be also listed on the Equity Market for Qualified Investors.
Equity Market for Qualified Investors
Equity Market for Qualified Investors is a newly established market under the Equity Market. According to Listing Directive, (i) non-public companies offering shares to qualified investors and shareholders of such companies and (ii) public companies that are not listed on Borsa Istanbul may apply for listing of their shares on the Equity Market for Qualified Investors. Shareholders of the companies listed on the Equity Market for Qualified Investors may sell their shares on such market, even if they are not defined as qualified investors.
Facilitated dual-listing on Borsa Istanbul
In order to facilitate dual-listing, Listing Directive permits dual-listing of capital market instruments traded on main markets of certain foreign stock exchanges that are admitted by the board of directors of Borsa Istanbul without seeking any other conditions, provided that the prospectus or issuance certificate is approved by CMB. In case a foreign entity plans dual-listing on BIST Star or BIST Main through an offering of its shares via private placement or sales to qualified investors, publicly offered shares to capital ratio, and, market value of publicly offered shares will be calculated by taking into consideration the ratio and the value of foreign company on the foreign exchange as of the date of the Borsa Istanbul resolution regarding dual-listing.
In addition, unlike the previous regulations, Listing Directive does not require foreign companies which apply for listing on Borsa Istanbul (i) to be listed on a stock exchange on their country of incorporation, or (ii) to receive the approval of the relevant ministry in Turkey.
The new structure of the Emerging Companies Market
Companies that are not eligible to be listed on BIST Star and BIST Main due to failure to match quantitative criteria listed above may apply for listing on the Emerging Companies Market. Listing Directive enables existing shareholders and persons purchasing shares from existing shareholders off-exchange to sell their shares on the Emerging Companies Market, provided that the publicly offered shares to capital ratio does not exceed 49%. However, investors holding Individual Participation Investor License (Bireysel Katılım Yatırımcısı Lisansı), venture capital trusts and venture capital funds may sell their shares regardless of the 49% threshold during the IPO or from the beginning of the trade of the shares on certain conditions.
As another improvement, Listing Directive requires companies applying to be listed on Emerging Companies Market to seek the approval of the board of directors of Borsa Istanbul in terms of their financial status and operations, along with the positive assessment of the Market Consultant.
Requirements for Companies to Remain Listed
Pursuant to Listing Directive, companies must not (i) have received three warnings in one calendar year from Borsa Istanbul regarding failure to fulfil their public disclosure requirements and (ii) have suspended their operations for the last two years. If one of the above mentioned conditions occur, the board of directors of Borsa Istanbul may resolve to delist such company. Companies will be assessed once a year in terms of compliance with the requirements to remain listed. Lease certificates (sukuk), warrants, certificates, ETFs, debt securities traded only by qualified investors and shares traded on the Equity Market for Qualified Investors are not subject to the above mentioned criteria.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.