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FRA Investigates 9 Insider Traders😧

Local Pickup🌇

FRA Investigates 9 Insider Traders😧

In light of the recent controversy surrounding EGX trading, nine EGX insider traders are being prosecuted & face fines worth EGP 1 million each, according to Al Mal.

Investigations conducted by the FRA revealed the existence of manipulative & illegal transactions, which led to the price bubble that recently popped in the market.

Below are 5/18 stocks & their performance for the period March 2020 to August 2021, compared to March 2020 to November 2021 (when the bubble burst for most of these stocks.) 

Let’s Take a Step Back🤷‍♀️ EIGHTEEN(!) EGX70 companies saw remarkable surges in their share prices (>500%) in the period between March 2020 to August 2021, prompting the FRA to keep a close eye on these companies’ stock transactions.

One stock, Egyptians for Investment & Urban Development (EIUD), rose more than 3000%, & it’s not the only stock to rise more than 2000% during that period. 

These meteoric price increases were driven by no fundamental basis, whether in the form of stellar earnings or significant company news &/or developments.

Why is this important🤔 The FRA has been criticized for intervening & canceling transactions that lead to unreasonable price hikes & requesting a fair value study of the share. These investigations only prove the validity of the FRA’s interventions to prevent manipulation & create abnormal price gaps that negatively affect the market.

Unnamed sources told Al Mal that investors are advised not to deal in stocks with irrational prices, especially those of companies that record losses in their earnings reports.

Vodafone Egypt Receives Offer from South Africa’s Vodacom📞

Vodafone Egypt (VFE) has informed Telecom Egypt (ETEL) that Vodafone Group (VFG) has received an initial offer from Vodacom for the transfer of VFG’s stake in VFE to Vodacom.

Huh?🤷‍♀️ Vodafone Egypt & Vodacom are both subsidiaries of Vodafone Group. 

Vodafone Egypt is currently owned by Vodafone Group (55%) & by ETEL (45%).

Vodacom wants to buy Vodafone Group’s stake (55%) in Vodafone Egypt.

Why is this important🤔 The current shareholders’ agreement grants ETEL “enhanced rights & benefits”, whereby ETEL gets preferential treatment during major shareholder restructuring, & has the option to purchase the 55% stake in Vodafone Egypt ahead of Vodacom. However, an acquisition by ETEL would give it full control of two of the four mobile operators in the country, posing a potential concentration risk to the sector. ETEL closed +0.73% yesterday.

Government Announces an Incentive Package to Support the EGX📃

Prime Minister Dr. Mostafa Madbouly held back-to-back meetings yesterday, where he stressed the importance of providing a package of incentives to support the stock market & improve the investment & business environments.

The most notable outcomes of the meetings were🧐

  • The implementation of a capital gains tax
  • Deduction of all trade-related & custody expenses
  • Abolition of stamp tax on stock market transactions for resident investors
  • No tax files will be opened for individuals investing in the stock exchange, & the clearinghouse is responsible for calculating & collecting tax after deducting expenses
  • Reducing tax on realized capital gains from IPOs by 50% for the first two years
  • Another highlight is that taxes will be calculated based on the higher of acquisition cost of a stock or the stock’s closing price by the end of the year. This allows investors the chance to pay fewer taxes in case of price appreciation, & maximize their return on investment.

Headlines We’re Watching👀

  • Annual Urban Inflation Recorded 6.3% in October, Down from its 20-Month High of 6.6% in September

  • GB Auto Explores Alternatives to Importing Three-wheel Motor Bikes

Global Pickup🌎

General Electric to Split into Three Companies3️⃣

U.S. industrial giant General Electric (GE) announced its plan to split into three companies focused on aviation, health care & energy, following years of poor stock performance. The decision was received with praise from Wall Street analysts.

Who is affected🤷 GE provides aviation, power, renewable energy, healthcare, & financial products & services. While aviation generates the most revenue, healthcare generates the most profit.

GE spent periods as the largest company by market value as recently as the early 2000s, but then the financial crisis hit, & GE never really recovered since then. GE’s revenue in 2020 was less than $80 billion, far from the more than $180 billion in revenue it recorded in 2008. 

Why is this important🤔 “By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees,” CEO Lawrence Culp said in a statement.

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