Alasania skeptical of Georgia's moves on Stock Exchange
By Ernest Petrosyan
Tuesday, August 16
The government’s plan for several major state-owned enterprises including several of strategic importance to float part of their stocks on the stock exchanges poses “serious risks” and any final decision should be preceded by broad public discussions, said the Leader of Free Democrats Irakli Alasania in an open letter addressed to the Prime Minister Nika Gilauri on August 15.
In the letter Irakli Alasania urges the government to refrain from floating the 15-25 % of share holdings of Georgian Railway, Georgian State Electric System, which is in charge of power transmission throughout the country; Georgian Oil and Gas Corporation [GOGC], the company which also operates the North-South Gas Pipeline, transporting gas from Russia to Armenia via Georgia; as well as an electricity distributor in capital Tbilisi, in which the state owns 24.53% are believed to be considered for Initial Public Offering (IPO).
“Although placing a company's shares on international markets is generally accepted practice itself, in our reality it might carry serious risks”, says Alasania.
Alasania warned Gilauri about the current pre-crises environment on the international stock market, due to which the shares of the Georgian state companies would be "significantly” undervalued at present. Alasania questions how credible the valuations of these state-owned enterprises have been.
“It is noteworthy, that when floating shares at international stock markets the companies’ management should meet the international standards in order to be adequately valued. Somebody may claim that the companies have been audited and adequately estimated, but this kind of information has not been made available for the society yet”, says Alasania.
"Accordingly, doubts have emerged that the authorities are interested in placing shares of the abovementioned companies on stock exchanges under the reduced valuation to allow particular investors to covertly privatize these facilities and later to seize controlling stakes of these facilities," claims Alasania.
In the letter Alasania mentions the examples of how the government sold strategic objects for a relatively low cost. “When the Poti sea port was sold, after 2 years and insignificant investments the Port had been resold at double the price”, added Alasania. He also claims that such a decision can be politically irrational because the neighbor countries can become potential buyers in order to enhance their political and economic influence over Georgia.
He also claims in the letter that the society “deserves to be informed about the financial situation of strategic facilities” and “to be actively involved in discussion process over expediency of their privatization.” "We categorically demand to stop the selling of strategic facilities to the detriment of the country's interests unless these conditions are met,” Alasania said.
“The selling of stakes of the strategic objects such as Georgian Railway, Georgian State Electric System, Georgian Oil and Gas corporation, namely North-South Gas pipeline through which Russia supplies Gas to Armenia, and other companies have economic and political risks. Firstly, it is not reasonable to float the shares now due to the rapid decline of international stock markets. Secondly, there are huge political risks since the Russian Federation will definitely try to purchase the offered 15-25% stakes of Georgian companies, which will later become an exchange card”, thinks Alasania.