2. April 2017 ETT: RTO vs. IPO 2
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3. April 2017 ETT: RTO vs. IPO 3
What Does An IPO Achieve?
IPO RTO / "Back Door Listing"
Ministry of Finance
/ SWF 1) Proceeds from selling some ETT shares, 1) Proceeds from selling some ETT shares,
ETT
1) International PR being a listed company,
2) Ability to pay acquisition with own shares,
1) International PR being a listed company,
2) Ability to pay acquisition with own shares,
ETT Executives
1) Possibility to have stock options incentives ,
2) International visibility,
1) Possibility to have stock options incentives ,
2) International visibility,
Mongolian Stock
Exchange
1) Listing fees,
2) Fees from secondary trading of ETT shares,
3) Huge increase in MSE market capitalization,
4) Huge increase in turnover,
5) International visibility & recognition,
1) Listing fees,
2) Fees from secondary trading of ETT shares,
3) Huge increase in MSE market capitalization,
4) Huge increase in turnover,
5) International visibility & recognition,
Brokers
1) Higher turnover => higher commissions,
2) New foreign clients accounts to buy ETT shares as
well as other MSE listed shares too,
3) Happy clients now able to sell their 1072 ETT
shares to (maybe to invest in other stocks),
1) Higher turnover => higher commissions,
2) New foreign clients accounts to buy ETT shares as
well as other MSE listed shares too,
3) Happy clients now able to sell their 1072 ETT
shares to (maybe to invest in other stocks),
ETT Shareholders
1) Enabled to sell their 1072 ETT shares & use
proceeds as they see fit,
2) Listing status + public financials filing => Better
corporate governance & transparency,
1) Enabled to sell their 1072 ETT shares & use
proceeds as they see fit,
2) Listing status + public financials filing => Better
corporate governance & transparency,
Mongolian Voters
1) GOM delivering under past promises as soon as
recovery of coal price enabled,
1) GOM delivering under past promises as soon as
recovery of coal price enabled,
Foreign Investors
1) ETT = MUST BUY stock for Frontier & Emerging
Markets Funds => GOOD REASON to undertake
account opening process in Mongolia to buy ETT on
MSE & other MSE listed companies too,
1) ETT = MUST BUY stock for Frontier & Emerging
Markets Funds => GOOD REASON to undertake
account opening process in Mongolia to buy ETT on
MSE & other MSE listed companies too,
Local Business
1) ETT listed on MSE => International attention =>
New foreign investors setting up MSE accounts =>
Much larger investors base for local businesses MSE
IPO to raise equity & grow businesses,
1) ETT listed on MSE => International attention =>
New foreign investors setting up MSE accounts =>
Much larger investors base for local businesses MSE
IPO to raise equity & grow businesses,
Mongolia
1) PR success for GOM => International attention =>
Opening other opportunities,
2) More foreign investors trading on MSE => Larger
investors base for private sectors IPO &
privatizations,
3) MSE becomes functional tool to help development
of Mongolia,
1) PR success for GOM => International attention =>
Opening other opportunities,
2) More foreign investors trading on MSE => Larger
investors base for private sectors IPO &
privatizations,
3) MSE becomes functional tool to help development
of Mongolia,
4. April 2017 ETT: RTO vs. IPO 4
Execution Technical Challenges
Dual Listing IPO MSE Only IPO RTO / "Back Door Listing"
Investor Base
Comprehensive & Very challenging
Roadshow to build credibility
because of very poor past
performance of Mongolian related
stocks
Very limited at this point
Not Applicable (no share sold);
foreign investors will come ONCE
ETT listed to buy on MSE from
Mongolians!
Due Diligence
Very comprehensive and intrusive,
therefore risky
Comprehensive Comprehensive
Documentation
Very Comprehensive, dictated by
foreign investment banks
Comprehensive to support
valuation
Light as no absolute valuation is
needed
Valuation Very difficult Difficult Not Applicable (no share sold)
Execution Team
Local + foreign investment banks,
law firms, accounting firms, foreign
regulators, foreign stock exchange,
MSE, FRC
Local investment banks, local law
firms, local accounting firms, MSE,
FRC
Local investment banks, local law
firms, local accounting firms, MSE,
FRC
Costs & Fees Very high
Low, to be negotiated between
ETT, MSE, MOF
Low, to be negotiated between
ETT, MSE, MOF
Time to Execute Likely > 12 to 24 months Likely > 6 months
M&A = Possible within 3 months
(Reverse Take Over by MSE listed
JSC)
Money Raised
Totally dependant on prevailing
situation in international markets,
coal prices and comparables as
well as perception of Mongolian
politics by foreign investors!
Limited because of small investor
base trading on MSE
Not Applicable during RTO;
Possible for MOF during Add-On
(SWF selling) + Secondary Listing in
~ + 12 months
Likelihood of
Execution
Totally unpredictable as mandated
investment banks will never
guarantee IPO price nor size issued,
not even completion
Totally under Mongolian control =
Perfectly predictable & doable
(MIK and MNP case studies) with
valuation challenges
Totally under Mongolian control =
Perfectly predictable & doable
(MIK and MNP case studies)
No Completion &
Image Issue for
Mongolia
Very high Limited
None, as RTO will be announced
once parties have come to an
agreement on terms
Earliest Window to
Execute
2018 - 2019 once audited
financials are established to
international standards after the
financial structure is totally
reshaped
2018
Possible in Q2-Q3 2017, aiming at
Add-On (SWF selling) + Secondary
Listing end of 2018
Possibility for SWF to
Monetize Substantial
Number of Shares
Outright sale by SWF during IPO
Issuing Bonds Exchangeable into
ETT listed shares on MSE 6 months
post IPO (see Temasek cases on
DBS and SingTel) = IPO + 6 months
Issuing Bonds Exchangeable into
ETT listed shares on MSE 6 months
post RTO (see Temasek cases on
DBS and SingTel) as early as Q1
2018
Compatibility with a
MMC-Shenhua-
Sumitomo Deal
IPO will be dependent on absolute
valuation which would be
dependent on such a deal being
inked + announced synergies
turned into realities, so IPO would
be POST deal
IPO will be dependent on absolute
valuation which would be
dependent on such a deal being
inked + announced synergies
turned into realities, so IPO would
be POST deal
Yes, the RTO will only affect the
ownership and listing status, not
the activities. Not deal dependent.
Compatible.