Here’s why “temporary listings” are all the rage right now

The state IPO program is moving into a more deliberate, almost pre-emptive phase. The government is preparing to temporarily list the Egyptian General Company for Tourism & Hotels (Egoth), a state-owned legacy player in domestic tourism, and is studying the potential sale of a stake in Misr Travel, a government official tells EnterpriseAM.

It’s the latest in a series of so-called “temporary listings” on the bourse about which Cabinet has made a lot of noise in recent months.

So, what’s a temporary listing, exactly? Think of it as a technical staging step where an IPO-hopeful is registered and assigned a ticker — effectively holding a spot on the exchange but not trading yet. In other words, its shares aren’t floated, no prospectus has been filed, and there’s no fair value study underway, CI Capital head of research Monsef Morsy tells EnterpriseAM.

Not every company with a temporary listing will necessarily make it onto the trading floor, Morsy tells us. In this geopolitical climate, the final decision to trade will depend almost entirely on macro dynamics in addition to “the company's sector, its level of profitability, and the performance of management,” he says.

We see the recent listing drive as a bid to keep forward momentum visible and the International Monetary Fund on-side. The move is part of a broader push to expand the state’s temporary listing roster to around 30 companies before the fiscal year ends in June. Investment banks including EFG Hermes, CI Capital, Al Ahly Pharos, and Arqaam Capital are reportedly advising on issuances under the program. The listings are part of the so-called “fourth phase” of the state’s asset monetization program, which has so far delivered just 7.5% of its USD 1.9 bn target.

The workaround

Temporary listings are a workaround of sorts to a big bottleneck in the IPO process. “It cuts short the timeframe needed to handle the logistics [of an IPO],” Morsy tells us. By pushing 20-30 companies through the listing process now, the government is front-loading the regulatory work, he explains. If the window opens for an actual offering, they’re not starting from scratch — they’re already halfway there.

In real terms: This is just an administrative green light. “The temporary listing is just the starting point for paperwork. When they decide to proceed with an actual IPO, they will appoint an independent financial advisor to value the company and an investment bank to handle the IPO process,” Morsy says — paving the way for marketing of the transaction to investors on roadshows and the like.

Coding the shares is the moment a closed company becomes structurally open to the public, Al Ahly Pharos head of research Hany Genena tells EnterpriseAM. Whether the endgame is a capital increase (a new investor pumping in fresh equity, diluting the state) or an exit by existing shareholders (the government cashing out), this coding is a necessary first step.

The catch

Temporary listings have a shelf life — and come with zero promises that a sale of equity will take place. Temporarily listed companies have a six-month window (it can be extended) to move forward with an IPO. They’re back to square one if they miss it.

REFRESHER- This whole setup leans on regulatory tweaks made by the FRA in 2022 that made it easier to get onto the EGX. Companies no longer need prior FRA approval to temporarily list, as long as they meet a stricter governance checklist. That includes minimum female board representation (25%), cumulative voting to protect minority shareholders, separating the Chairman and MD roles, and capping authorized capital at 5x issued capital.

Meet the (latest) hopefuls

Misr Travel and Egoth are both owned by the Holding Company for Tourism, Hotels and Cinema. Set up in 1976, Egoth is a hospitality asset manager with a portfolio of some seven hotels across the country, including Cosmopolitan Hotel, Cleopatra Hotel and Shepheard Hotel. Misr Travel, founded by Talaat Harb in 1934, is a travel agency managing hotel bookings, transportation services and trips across the country, as well as in Jordan. Despite the lack of granular detail on these specific firms yet, the tourism sector is “one of the key sectors” investors will likely find attractive, Morsy tells us.

The IPO tape has been padded with names. El Nasr Housing, Sinai Manganese, and Spring and Transport Equipment Manufacturing are players across petrochemicals, metals, construction and the public business sector, all of which likely “tick most of the boxes — are already profitable in a sector with potential,” Morsy says. Temporary listings of the Egyptian Contracting Company - Mokhtar Ibrahim, Misr Company for Sound and Light, Commercial Company for Wood, and El Nasr Salines are also proceeding, a senior government official tells EnterpriseAM.

Think of it as a menu (or a hedge), not a schedule: By listing multiple companies from a range of sectors, the government is building optionality, Morsy tells us. The state isn’t locking in a sequence because it’s dealing with “continuous changing in the overall [macro] dynamics,” he says. In simple terms: If it finds an investor interested in Company “X,” the time from, “Hey, I like that” to “Sold” will be faster if the firm already has a listing.

So, instead of banking on one sector, it’s “opening up every sort of company or opportunity” so they can “decide at a later point which of the companies they’ll start with” based on where demand actually shows up, he said, adding that “the selection will depend mainly on the macroeconomic situation, which is relatively uncertain regarding commodities, oil prices, and even transportation costs.”

Who’s most likely to sell? Companies with “exposure to the domestic market and less sensitivity to what’s happening externally” are more likely to make a dash out onto the trading floor — especially those not heavily reliant on imported inputs, Morsy tells us, pointing to the financial services and fintech sector as the contenders.