ARTICLE
13 January 2025

Newsletter On The Capital Markets Board's Decision Regarding The Amendments On Sales Methods And Distribution Principles To Be Applied In The Initial Public Offering Of Shares

The Capital Markets Board ("Board") has made significant changes regarding the methods to be applied and the distribution principles for the initial public offerings of shares.
Turkey Finance and Banking

The Capital Markets Board ("Board") has made significant changes regarding the methods to be applied and the distribution principles for the initial public offerings of shares, in order to largely meet the investor demands in the initial public offering ("IPO") of shares with the Board's principal decision numbered SPK 128.23 (decision dated 19/09/2024 and numbered 1508) ("Decision") published on the Board's bulletin dated 19.09.2024 and numbered 2024/48, in relation to the reduction of amounts for the prerequisites to be adhered to prior to the initial public offering. With this decision, the previous principle decision numbered i-SPK 128.21 (decision dated 30.03.2023 and numbered 20/412) has been repealed ("Repealed Decision").

As per the abovementioned changes, the main regulations to be applied in initial public offerings are as follows:

  1. If the market value of the shares offered to the public is TRY 750,000,000 or lower, the requirement to conduct the public offering exclusively through the stock exchange sales method remains in effect, and the threshold amount has not been amended with the Decision.
  2. If the market value of the shares offered to the public exceeds TRY 750,000,000 and the sales method involves gathering demand outside the stock exchange, the main principles to be applied are as follows:
    • All investors in the domestic individual investor group will be subject to an equal distribution method, and proportional distribution will not be applied.
    • Provided that it is defined in the prospectus, up to 10% of the total amount to be offered in the public offering may be allocated for a group of investors that will make high demand, excluding institutional investors, and equal or proportional distribution methods may be used for this group. If the proportional distribution method is determined, investors will be required to provide cash equal to the entire amount demanded and/or collateral in shares from the BIST30 index amounting to 120% of the demanded amount. For each investor, the amount of shares that can be demanded will not exceed one-fourth of the total amount of shares allocated to the group.
    • For distributions to domestic institutional investor groups, if there is sufficient demand, at least 50% of the allocated shares must be distributed to investment funds, pension investment funds and/or automatic enrollment system pension investment funds and additionally, the amount of shares allocated to each institutional investor must not exceed 1% of the total amount of shares offered in the public offering. For funds established and/or managed by a portfolio management company ("PMC"), this limitation will be applied as 3%. If PMCs and entities with which they have direct or indirect relationships in terms of management, auditing, or capital wish to demand shares on their own behalf, the allocated share amount, if there is sufficient demand, will not exceed 2% of the offering amount.
    • At the end of the demand collection period, if there is sufficient amount of demand to meet the amount allocated to a specific investor group, the allocation rate for that group cannot be shifted to other groups. However, if there is an investor group with insufficient demand, the remaining portion can be freely transferred to other groups.
    • In distributions to the foreign investor group, it has been stipulated that if distributions are made to circumvent or evade the provisions regarding the other distribution principles mentioned above (such as distributing to overseas funds or other legal entities owned by domestic real or legal persons), the issuer and the authorized institutions acting as intermediaries for the public offering (the consortium leader in the case of a consortium) will be held liable. The issuer and the authorized institution/consortium leader acting as intermediary for the public offering will be required to submit an undertaking to the Board, affirming their compliance with the aforementioned provision and that they will conduct the necessary due diligence regarding foreign investors.

The regulations other than those listed above maintain current implementation principles as outlined in the Repealed Decision.

You may access the relevant publication of the Board (in Turkish) via the link below:

https://spk.gov.tr/data/66ec7a468f95db223cb0e1a1/2024-48.pdf

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.

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