Turkish Small Caps Race to List as Stock Market Hits Record

(Bloomberg) -- Turkey’s smaller companies are rushing to tap public markets and cash in on a flood of local retail investors, who have helped push the country’s stocks to new highs.

Three companies have filed with the Istanbul exchange recently, targeting initial public offerings this year, including Verusa Holding AS’s construction unit Aldem Celik and Odas Elektrik AS’s coal miner Can Komur. And at least another seven companies said they are considering going public in Turkey in 2021. If all of the listings materialize, it would be Borsa Istanbul’s busiest year for IPOs since 2014, according to data from Turkey’s Capital Markets Board.

The surge in small-cap listings is supported by strong demand from Turkey’s expanding retail buyer base. Over the past year, they helped drive a 260% gain in the Borsa Istanbul SME gauge for small stocks, which is hovering near a record high, compared with a 26% rise in the benchmark Borsa Istanbul 100 Index in the same period.

Among the seven companies considering going public, there is software firm Golive Yazilim, dairy farming company Efeler Ciftligi and Dogan Holding AS’s clean power subsidiary Galata Wind Energy. Plastic sheet producer Isik Plastik was this year’s first IPO in Istanbul, listing late last month, and the stock has surged 81% since then.

The 10 IPO processes that are underway are “mainly in the energy, real estate and food sectors,” Tevfik Eraslan, the head of the Turkish Capital Markets Association, said in an interview, adding that he sees scope for more companies planning to list in Istanbul this year.

The brisk appetite for small and mid-cap IPOs is likely to continue, though demand will mainly be confined to retail investors, according to Burak Cetinceker, a money manager at Strateji Portfoy. Companies don’t want to miss out on the opportunity “to benefit from the stock market rally and tap the influx of domestic individual investors,” he said.

All of the eight Istanbul IPOs last year rose at least 45% in their first five days of trading. In December, Arzum Elektrikli Ev Aletleri’s listing saw demand from retail buyers for 54 times the shares on offer.

Sharp gains fueled by retail traders have sparked concern, however, with Turkey’s Capital Markets Board warning non-professional investors to be careful in picking stocks. The risk appetite and equity rally have allowed the market to turn ballooning prices into “a small detail that could be ignored,” Cetinceker said, acknowledging the risk of a correction in small stocks.

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