NASDAQ OMX Armenia: Why and How to Become a Listed Company Presentation for AmCham Membership Meeting Karen Zakaryan, November 25, 2010 NASDAQ OMX Armenia Central Depository of Armenia © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. About NASDAQ OMX NASDAQ OMX is the world’s largest exchange company, formed by the merger of US exchange operator NASDAQ and Nordic exchange operator OMX in March 2008 NASDAQ OMX is present in 21 countries Operates stock exchanges and securities depositories in the US, Sweden, Finland, Denmark, Iceland, Estonia, Latvia, Lithuania and Armenia Sells exchange technology, such as trading systems, to more than 70 customers in 50 countries More than 4,000 listed companies worldwide Since Q3 2008 included in Standard and Poor’s 500 index In 2009 Journal "Fortune" included NASDAQ OMX among 100 Fastest-Growing companies © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. NASDAQ OMX Armenia vision Armenia – the leading capital market in the region To operate a trusted and liquid marketplace that provides efficient services, meeting the needs of customers in Armenia and beyond © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Timeline Armex established Feb-2001 Apr-1999 CDA established First trading session in stocks on Armex Jul-2001 First trading session in corporate bonds on Armex Dec-2005 Nov-2005 Foreign currency trading launched on Armex © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Government bonds trading launched on Armex Jan-2008 Jan-2008 Armex and CDA join under NASDAQ OMX brand Mar-2008 NASDAQ OMX Armenia acquired CDA Jun-2009 Credit resources trading launched Apr-2010 Feb-2008 Dec-2008 Jan-2009 OMX acquires 100% stake in Armex and CDA Combination between NASDAQ and OMX completed REPO trading launched Armex renamed NASDAQ OMX Armenia “One company, one mission” NASDAQ OMX Armenia (formerly Armex) • The only stock exchange in Armenia • Exchange operator since 2001 • Efficient trading system, capable of supporting trading in a range of instruments • Home to the best Armenian companies Armenia • Leading global brand • Industry standard services • Transparency of operations • Synergic performance • A reputation of Central Depository of Armenia (CDA) • Centralized registry keeping and custodian services since 1999 • Maintaining registries of 1,573 companies • Servicing more than 157,000 securities accounts © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. sustainability and success • Growing variety of exchange markets Decision to advance • There are many ways to foster the growth and development of a company. One is to publicly list the company on the stock exchange. • Being listed is certainly not suitable for all companies, but the fact that most large successful companies in the world are public listed companies is a fact that speaks for itself © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Road to NASDAQ OMX - Armenian market IF YOU ARE: • a successful operating or growing joint stock company • economically and financially sound • a company with ambitious strategic development plans and good future prospects (contemplating the possibilities of an acquisition, a merger with another company, or planning to expand to new geographic markets, etc.) • ready to be transparent and open to investors © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Road to NASDAQ OMX - Armenian market (cont.) AND YOU NEED/WANT: • long-term financing sources to develop your business • to build investor interest and confidence, and to attract new investments • to determine the company’s value and enhance its share liquidity, as well as its attractiveness to investors • to develop a broad shareholder structure • to give existing owners the possibility to exit by selling shares to other investors • to become more competitive • to utilize your company’s shares as a liquid currency to acquire other companies • to implement employee incentive programs • to enhance the transparency and publicity of your operations • to increase the company’s visibility and strengthen its reputation Then NASDAQ OMX Armenia is here to help you discover a wide variety of financial market opportunities that meet your needs © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Route to the stock exchange Depending on your needs and readiness, you can choose your route to the stock exchange from the following: • share listing – a long-term decision - to enter a stock exchange through an Initial Public Offering (IPO) - listing of shares without a simultaneous public offering • listing bonds – a flexible solution © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Listing bonds Listing debt securities is the most flexible way for companies to start their journey on the capital market. By issuing new bonds, a company can improve its financial structure and extend the range of investors, especially when market conditions are too poor to issue shares. As bonds have predefined maturity dates, their listing is of a temporary nature. That makes it suitable for testing the status of a public company. © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Share listing - One of the traditional ways to enter a stock exchange is through an Initial Public Offering (IPO) An IPO enables a company to attract capital, publicly selling a substantial holding to a wide range of investors. -Listing of shares without a simultaneous public offering If the company already has a wide shareholder base, it is possible to get listed without arranging a public offering. In this case, the listing of shares allows the company to raise its profile and provides the company with the possibility to raise capital. © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Doing an IPO would mean • The possibility to raise more capital, to enable faster growth of the business, for example through investments in new systems or the opening of new branches • Lower cost of capital (share capital is generally cheaper than debt, it does not expire or has to be refinanced like a bond or a bank loan) • Giving the current owners the best possible price for the shares sold – by enabling many investors to buy the shares instead of only one or a few • Further increase the value of the shares by listing the company in a liquid market, where investors know they can sell their shares immediately if they want to (an investor in a non-listed company can not be sure to do this, which reduces the value of his shares) • Information about the real market value of the shares in the company, as shown every day in the trading on the exchange • Good PR, both from the publicity around the IPO and from the increased attention in the media for a listed company with many shareholders (daily information about the share price, media attention for financial reports and press releases etc) © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Reasons to do an IPO NOW • The Government of Armenia and institutions such as the CBA strongly support the development of the Armenian capital market and are sure to support any company that decides to do an IPO in Armenia • The RA Government approved the package of tax benefits for the companies to be listed on the exchange • listed company can reduce the amount of tax payable by AMD 300 mln per year • any VAT paid for services during listing process will be reimbursed upon the company’s successful listing on the exchange • The new, funded pension system planned by the Government of Armenia will provide plenty of capital to be invested in companies listed on NASDAQ OMX Armenia • In general there is a large interest among foreign investors in new, emerging markets. Doing the real IPO would mean that any foreign investor who wants to buy listed shares in Armenia would be interested in buying shares of your company, which will again increase the share price © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Reasons to do an IPO at NASDAQ OMX Armenia Once the decision is made to do an IPO, the question is where the shares should be traded. We believe there are several reasons why listing shares on NASDAQ OMX Armenia provides the most value for current owners: • NASDAQ OMX, with its internationally recognized brand and exchange industry expertise, is a mark of the quality of any IPO done on NASDAQ OMX Armenia • We have high requirements to allow a listing, but thanks to these high requirements investors know they can trust the information from the company, trust the trading procedures on the exchange and trust the IPO process. This will mean they are prepared to pay a higher price for shares in the IPO • Compared to a listing on an exchange outside of Armenia the costs for listing and the advisory services from investment banks or other advisors will be lower • A local listing will increase the visibility of the company in Armenia and enable more local investors to participate in the IPO. Having a strong local investor base will also increase liquidity in the share trading • By listing in the Armenian market the company will support the development of the local Armenian capital market. The company will in its turn benefit from this positive development of the market © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. How to prepare an IPO • Make of company history and transfer of systems of the financial reporting on the international standards • Gathering of opinions of investors and investment analysts concerning criteria of an estimation of the companies of the same type, the same branch, the same country on the chosen type of a platform target investors • Formation of a design team, choice of partners: the financial adviser, the legal adviser, the auditor, the adviser on marketing for definition of information policy of the company, organization IR and PR program, the auditor of corporate management for definition of a position of a rating of corporate management • Preparation of analytical reports about: - Parameters of activity of the company - Strategy of the company - Management of the company • Carrying out due-diligence • Disclosing of the information on the company among the broad audience of investors and definition of a range of the price of the share, and as the organization road - shows. © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. How NASDAQ OMX Armenia will support the IPO/listing process • Advise on how to structure the IPO • Advise on selecting advisors, underwriters etc • Assistance in every step of the listing application process, as well as assistance in contact with other institutions such as the CBA • Contacts with international investors, including NASDAQ OMX members in London and other financial centers • Assistance with presentation of the company to potential investors (such as review of presentation material, advise on information to investors and assistance in setting up a road-show to meet investors) • Advice on how to set up an Investor Relations function within the company for communicating with investors after the IPO • Advice on how to handle reporting, audits and information about significant events to comply with NASDAQ OMX Armenia listing rules and keep the trust of investors © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. To Get Listed an Issuer Must Submit: • Listing application • Listing prospectus in the format established by the Central Bank (CBA) • Unique identification code (ISIN) assigned by the Central Depository of Armenia • Financial statements with auditors’ conclusion • A copy of the resolution by the company’s authorized body on having the securities listed • Other relevant documents © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. What it Takes to Live as a Listed Company Continuous obligations of listed companies: • Submit reports to the CBA and the stock exchange, as required by capital markets regulations • Be transparent and abstain from shadow practices • Ensure disclosure of financial and other information to public • Maintain an Investor Relations unit • Implement corporate governance standards and practices © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. How to support the secondary market • Have a market-maker for your shares at a stock exchange and regular work with investors • preparation and publications of the regular reporting • support of the corporate website • disclosing of essential facts from a life of the company • release of analytical reports • carrying out road – shows • the organization conference - calls between top-management of the company and investment analysts • the organization of performances of top-management at the international forums and conference • the organization of meetings of top-managers with large investors or fundmanagers • the organization of press-support of activity of the company. © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Exchange Traded Instruments Corporate Bonds Equities - Main List (A) - Main List (Abond) - Secondary List (B) - Secondary List (Bbond) - Free Market (C) Government & CBA Bonds - Traded but not listed - Free Market (Cbond) REPOs - REPO and reverse REPO agreements Currency - USD and EUR Investment companies and banks participate © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Credit Market - Overnight credit resources Only banks participate List Structure & Requirements / Equities • Shares Main A List • Shares B List • Shares Free Market (C) Requirements: Requirements: Requirements: - Equity Capital min. AMD 1 bln - Equity Capital min. AMD 500 mln - No requirements - Issuer operating for no less than 3 years - Financial statements for last 3 years audited by independent auditor - Net financial result for last 3 years – profit - At least 100 registered shareholders - Free float min. 15% © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. - Issuer operating for no less than 3 years - Financial statements for last 3 years audited by independent auditor - Free float min. 10% - Opportunity to disclose information on the issuer to investors - Companies that are under liquidation, including for the reason of bankruptcy, can not be admitted List Structure & Requirements / Bonds • Bonds Main A List (Abond) • Bonds B List (Bbond) Requirements: Requirements: - Issuer operating for no less than 3 years - Issuer operating for no less than 2 years - Issuer carried out its core activities for at least the last 2 years - Size of the given issue min. AMD 250 million - Size of the given issue min. AMD 500 mln - Financial statements for the last year audited by independent auditor - Financial statements for last 2 years audited by independent auditor © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. • Bonds Free Market (Cbond) Requirements: - Size of the given issue min. AMD 100 million - Any bonds with maturity up to one year are included in the Free Market - Companies that are under liquidation, including for the reason of bankruptcy, can not be admitted Securities Listed/Admitted to Trading (as of 25-Nov-10) Equities (A-Z) Bonds (A-Z) • Armenian Economy Development Bank (B List) • ArmRusGasprom (Abond list) • Artsakh HEK (B list) • Almast • Araratbank • Arax • Arpa Sevan • Armenian Development Bank (2 issues) • Pure Iron Plant • Yerevan Factory of Champagne Wines • Yerevan Jewellery Factory • Yerevan Jewellery Factory -1 (Gnomon) © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. • Araratbank (Bbond list) • Converse Bank (Bbond list) • Shen Concern (Bbond list) • Valletta (Bbond list) NASDAQ OMX Armenia Membership • Capital adequacy: on Jan 1, 2009, the requirement was raised from AMD 60 million to AMD 100 million, and from Apr 1, 2011 it will be increased to AMD 300 million © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. • Membership in NASDAQ OMX Armenia is open to all companies who provide investment services and comply with CBA and NASDAQ OMX Armenia requirements NASDAQ OMX Armenia Members (in alphabetical order) (as of 25 November 2010) • ACBA-CREDIT AGRICOLE BANK CJSC • BTA BANK JSC • AMERIABANK CJSC • CAPITAL ASSET MANAGEMENT CJSC • ANELIK BANK CJSC • CASCADE INVESTMENTS CJSC • ARARATBANK JSC • CONVERSE BANK JSC • AREXIMBANK CJSC • FUTURE CAPITAL MARKET LLC • ARDSHININVESTBANK CJSC • HSBC BANK ARMENIA CJSC • ARMBUSINESSBANK CJSC • INECOBANK CJSC • ARMENBROK CJSC • PROCREDITBANK CJSC • ARMENIAN DEVELOPMENT BANK JSC • PROMETEY BANK LLC • ARMENIAN ECONOMY DEVELOPMENT • RENESA CJSC BANK JSC • TONTON INVESTMENT CJSC • ARMSWISSBANK CJSC • UNIBANK CJSC • ARTSAKHBANK CJSC • VTB BANK ARMENIA CJSC © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Trading, Clearing & Settlement • Trading System: - Armex Plaza (based on RTS Plaza 7.7) • Trading Mechanism: - continuous trading, manual trades • Trading Hours: - daily 11:00-15:00 • Members: - 25 member firms (banks and investment companies) have remote access to Trading System • Settlement: - T+0, full DVP © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. What are my options of getting information about the Armenian capital market? • Via NASDAQ OMX Armenia official website: www.nasdaqomx.am • By contacting NASDAQ OMX Armenia member investment/broker companies and; • Via Bloomberg agency that has contract with NASDAQ OMX Armenia; Or by contacting us directly: Address: 5b Mher Mkrtchyan str., 0010 Yerevan, Armenia Tel.: +374 10 543 321 ext. 115 Fax: +374 10 543 324 E-mail: [email protected] © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved. Thank you! © Copyright 2008, The NASDAQ OMX Group, Inc. All rights reserved.
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