Turkey is preparing to introduce new regulations that will make the process of trading for companies on the Borsa Istanbul (BIST) stock exchange less cumbersome and a lot easier. Deputy Prime Minister in charge of the Economy Mehmet Şimşek reported that the government has made arrangements to remove the obstacles facing companies that cannot trade on BIST due to their inability to generate period profits due to the expenses accrued from investment financing.
Şimşek said that the government has passed legislative amendments that will provide flexibility for companies with a market value of more than TL 100 million ($28.35 million) - the size of Star Market - which have applied to be traded on BIST.
In this context, Şimşek stated that they have provided facilities for companies which have generated operating profits but failed to obtain the "two-year term profit" that is required in this market, after suffering period losses due to financing costs indicated in the quotation application with the request to be traded on the BIST Star Market, adding that they are making exceptions so that the shares of these companies can also be traded on the stock market.
According to deputy Prime Minister Şimşek, provided that the company has successfully completed the independent auditing process, shows operating profits over the last year, provides the relative interim financial statements with pertinent information on those activities, shows the financing structure and the use of the public offering income, BIST will be able to decide the quotation of the shares of those companies which cannot fulfill the condition of generating two-year term profits on the Star Market. In addition, BIST may take into consideration the amortization and redemption amounts that do not require cash outflow when calculating the operating profit. Thus, the demands of both the issuing companies which have failed to fulfill the conditions for obtaining the two-year period profit but have generated operating profit, as well as investment companies such as UBS, Citi Bank, JP Morgan and Merrill Lynch, which acted as an intermediary for the public offering made for the international investors, have been met.
Stressing that with the said legislative amendment it will be possible for companies to finance their investments by taking advantage of the opportunities offered by capital markets rather than bank loans, Şimşek said, "We aim to save our companies from high financing costs and help them turn into profitable companies." Şimşek underlined that the obstacles facing these companies, which failed to be traded on Borsa Istanbul since they cannot generate period profit due to their investment financing expenses such as exchange rates, interest rates and foreign stock market searches, when they try to enter the Turkish stock market have been removed within the framework of the vision of the Istanbul Financial Center.
Suggesting that with this arrangement, the companies' structure of capital will be strengthened and profitability will be positively impacted due to the reduction of financing expenses by providing funds from Turkey's capital markets, Şimşek noted that these companies will, therefore, be able to contribute to the country's economy by making investments and increasing employment, adding that Borsa Istanbul will gain depth with the liquidity that will be formed.
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