IPO Requirements Updated for 2024: Innovations and Changes

The Capital Markets Board's ("CMB") decision dated December 28, 2023 and numbered 81/1811 updated the revaluation criteria in the relevant capital markets legislation for 2024. The new amounts determined as a result of this update have made the public offering conditions applicable to companies to be offered to the public for the first time in 2024 more stringent. In line with the CMB's amendments, Borsa Istanbul A.Ş.'s Listing Directive has also been amended with respect to the conditions for the listing of shares to be offered to the public on the Stars Market, Main Market or Sub-Market.

In this context, the amounts of the underwriting obligation of the intermediary institutions intermediating the sales in the public offering, determined according to the market value to be calculated based on the public offering price of the shares to be offered to the public, excluding additional sales, of the corporation whose shares will be offered to the public for the first time, have been revised upwards.

The market value of the shares to be offered to the public to be calculated based on the public offering price, excluding additional sales:

• Below TRY 400 million, underwriting is required for all unsold shares (this amount was set as TRY 150 million for 2023).
• Between TRY 400 million and TRY 800 million, underwriting is required for the entire amount up to TRY 400 million and half of the amount in excess of this amount (for 2023, these thresholds were set as TRY 150 million and TRY 250 million).
• Above TL 800 million, there is no underwriting obligation (the thresholds for 2023 were set at TL 250 million).

According to the new regulations, an important criterion for companies to be offered to the public for the first time is market capitalization. Accordingly, if the market value of the shares to be offered to the public, excluding additional sales, calculated on the basis of the public offering price is below TRY 500 million, 25% of the shares to be offered to the public must be kept ready for sale by completely restricting the shareholders' right to purchase new shares (this amount was set as TRY 231,903,989 for 2023). This measure was taken to ensure balance in the IPO process of smaller companies and to maintain stability in the market. Considering the threshold amounts set in the past, it is clear that this regulation represents a more inclusive approach.

The new regulations set by the CMB for companies entering the IPO process have introduced stricter standards in terms of financial soundness and transparency. In this context, companies to be offered to the public are required to have a financial performance proven by financial statements prepared in accordance with CMB regulations and audited by special independent auditors. Accordingly

• According to the 2023 dated financial statements, the company's net sales revenue should be TL 750 million and its total assets should be TL 1 billion 500 million. These financial indicators will constitute the standards to be used as the basis for the IPO application. In their applications, companies should have their annual financial statements for 2023 prepared in accordance with CMB regulations and undergo a special independent audit.
• For the previous years, a certain level of financial soundness is required, but lower than the financial statements dated 2022. In 2023, the company's net sales revenue should be TL 270 million and its total assets should be TL 450 million. This is an important criterion in assessing the company's financial history and reliability.

In addition, companies take steps by harmonizing their articles of association with capital market regulations and switching to the registered capital system prior to the public offering. In this process, the initial capital of companies that will switch to the registered capital system must be at least TRY 100 million (this amount was determined as TRY 30 million in 2023.) These regulations enable companies to adapt to market conditions and enter the public offering process with a more solid foundation.

Another important factor affecting the IPO process is the conditions set for the listing of the shares to be offered to the public on the relevant market. The minimum amounts determined according to the market capitalization of the shares offered to public in Borsa Istanbul are as follows:

• For listing on the Stars Market, the market capitalization of the shares offered to the public must be at least TRY 1 billion.
• For listing on the Main Market, this amount is set at TL 250 million.
• The minimum amount for listing on the Sub-Market is TL 100 million.

In addition, the ratio of the nominal value of the shares offered to the capital must also comply with certain standards. These ratios are set at 10% for the Stars Market, 20% for the Main Market and 25% for the Sub-Market.

In particular, for listing on the Stars Market, companies must have "a profit for the period in their independently audited annual financial statements" or "the equity/share capital ratio in the most recent independently audited financial statements". In the event that the company fails to meet certain conditions, it is given the opportunity to apply to Borsa Istanbul. However, in this case, the market value of the shares offered to the public must be at least TRY 1.5 billion. Therefore, it is important for companies to consider these criteria and make the necessary preparations before applying. Otherwise, their applications will not be accepted. These new regulations encourage the financial soundness of IPO companies and their reliable position in the market.

Amounts increased as a result of revaluation will not be reflected to companies that apply to the CMB by December 31, 2023; instead, the amounts in effect on the date of application will be taken into account.

All these changes have been made to create a more transparent and reliable environment in capital markets. In 2024, with the implementation of these new regulations on IPO processes, it is aimed to offer more robust and strong companies to the public and to protect investors. These changes are considered as important steps that will contribute to the sustainable growth of capital markets.