Justin Vela in Istanbul -

The number of Turkish IPOs this year is likely to fall short of the ambitious target set by the authorities, but the government is putting a new importance on equity offerings at a time when international investor interest in Turkey has never been higher.

This method of share sales was popular in Turkey during the 1990s. But after the country's financial crisis in 1998 and 2001, the IPO fell out of common usage. "The social memory is short in Turkey," says Akin Nazli, a business writer for the magazine TurkishTime. "They don't remember the 1990s' IPOs."

This year, the country's Capital Market Board (CMBT) and the Istanbul Stock Exchange (ISE) are pushing hard to get especially small and medium-sized businesses onto the market and companies themselves are looking for alternative methods of financing, as procuring loans from banks has become more due to the global economic crisis. A goal of 50 IPOs this year was set, but with only 17 so far, this is likely to prove too ambitious. Next year, Nazli expects the level of understanding about IPOs to have increased, predicting 20-25 for 2011 - provided there are no external shocks to the market.

Bugra Baban of Turkey's Oyak Securities, which will act as the lead manager for a number of Turkish IPOs this year, says: "We have seen an intense effort to encourage owners to bring [their] companies to the market. We really feel that the Capital Market Board is with us."

Oyak is overseeing the IPO of Marti REIT, a large Turkish tourism and land development company (Marti Otel owns 94% of the REIT and has been trading on the ISE since 1989). As lead manager, Oyak will oversee what is expected to be a $50m-60m IPO that has 25% allocated for international investors. "Pricing is the most important key element of a successful IPO," Baban explains. "A tight price range is very important. If this range is too open, it causes a lot of uncertainty in the eyes of the markets."

Transparency required

The slow move towards IPOs in Turkey is because most companies do not fully appreciate their benefits. According to Nazli, only a small percentage of companies are publicly listed on the stock exchange, as business owners and board members may often be hesitant to open up their companies, not being comfortable with the level of transparency required. "An IPO has some unique characteristics," says Baban. "It opens up a company to a very large and diverse investment base that you can rely on to further your publicly traded company."

Guray Kucukkocaoglu, economics professor of Bashkent University, says that Turkish laws and excessive regulation also make companies hesitant about going public. He said that the CMBT is now "changing its approach to its regulatory environment and [easing] the way of going public."

There is a campaign by the authorities to convince small businesses that by going public they will be able to access financing alternatives more easily and, also, have the opportunity to be managed by larger organizations. This will increase the stature and value of their companies. "There are more regulations that must be followed, but that is more likely to make you receive investment because investors know your company is at a certain level," said Baban.

By going public, companies retain more control than they might expect. "Often [only] 10-20% of a company is put up for the IPO," says Nazli. "This is a small part of the company's shares."