Uncertainty impacts Jordan Telecom IPO

Uncertainty and apathy seen as biggest reasons for Jordan Telecom Company's (JTC's) underwhelming initial public offering (IPO.)

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By  David Ingham Published  November 14, 2002

Consumer caution, regional uncertainty and low awareness were some of the reasons given by observers for the disappointing IPO of Jordan Telecom Company (JTC.)

15% of the company was offered to the public in an open subscription in October, ahead of the stock’s listing in November on the Jordanian Stock Exchange. However, only 70% of the shares on offer to the public were snapped up, meaning that the equivalent of 4.5% of the company was sent back to the government. Analysts had been almost unanimous in their view that public demand for JTC shares would exceed supply.

Sarah Alalul, analyst at Arab Advisors Group (AAG), admits that the disappointing response to the IPO was a, “surprise for analysts and the financial community.”

Hala Buqain, also at Arab Advisors Group, said that the general public perhaps did not understand enough about the company. “People are not aware of the potential of Jordan Telecom — they just saw that the profits were down this year,” says Buqain. “However, Jordan Telecom made a huge investment in Mobilecom [its mobile services division] and we expect MobileCom to be profitable this year, which would definitely increase JT’s group revenue.”

However, Zeid Nasser, general manager of MediaScope and secretary general of IAA Jordan, believes that the lukewarm response to the IPO was not due to any lack of media ‘buzz.’

“Jordan Telecom ran a strong advertising campaign in daily newspapers, outdoor media and TV for its IPO with a message based on the company’s strength in terms of capital and total volume of sales, mentioning these figures to the public throughout the campaign,” says Nasser.

“As for PR, there was substantial, and continuous, press coverage of this IPO. So, any shortcomings in the IPO process cannot really be attributed to the campaign.”

Although lack of awareness may have played a part, everyone agrees that lack of a shareholder culture and regional uncertainty were much bigger reasons for Jordanians’ reluctance to buy shares. “Jordanians are not risk takers — they are waiting to see how the stock will perform,” says Buqain. “Not many people had the courage to make the first move and buy the stock.”

Ongoing uncertainty in Jordan because of the Iraq situation has been reflected in lower activity on the Amman Stock Exchange. Trading volumes there were much lower in October than in September.

“Statistics show that ASE’s trading volumes are descending and expected to continue to do so as long as the US war rhetoric continues,” wrote Ghassan Joha, staff writer at The Star, in an op-ed piece.

“All of us are waiting to see what happens,” adds Sara Alalul.

Zeid Nasser also feels that lack of a shareholder culture in Jordan and regional uncertainty had the biggest impact on the IPO.

“My personal view is that this was the first IPO of its kind in the country, people approached it cautiously, and it will take a couple more of these IPOs before the public puts its money into such initiatives,” he says.

“What’s more, this is a time of economic uncertainty for the region, with the Iraq-US situation, and Jordanian investors, like others across the world, need more stability to feel safe about investing their money.”

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