Some who follow the market news daily can notice that many companies in Kuwait are entering the stock market, the last one was Bareeq Holding. This kind of method is called split off, but its kind of the Kuwaiti split off just to gain money and raise capital. Let me give a simple example how the financial world create tools to make more existing money and opportunities. Gulf Franchising Company GFC is a listed company in the stock market and the main operations are the Kwik Kopy shops and Sac’sec the french Laundry and the pitman training schools. So what i have stated above is its main operations and the main money maker or core service, but as you all know everything in Kuwait is the other way round. Money is raised from the public as IPO and the money used in such companies goes into the market again instead of real operations like the franchise brands they acquire, some times it seems like these brands are a cover for something else. So back to Bareek Holding, now this company as they claim has purchased the Sac’sec laundry franchise from GFC and made its own company to go public too, and Bareeq made an IPO and went into the stock market. The company owns only a laundry franchise and its being traded in the KSE! at 200fils, GFC is being traded at an average of 300fils! and to make matter worse about 60% of Bareeq profits are from investments not from operations of the laundry itself. So my questions here are we over evaluating the Kuwaiti Stock market, may such moves create a bubble? many more companies are following the same path by creating split off company which are physically on the same location, meaning by just introducing a department within a company and then giving it separate entity and registering it in the ministry of commerce then raisin capital and releasing it into the market. Beware of such moves, these are illegal in the states due to what is called as exit strategies. Some large owners of these shares sell off everything they have on the fist day they go public!  

This entry was posted on Tuesday, June 19th, 2007 at 9:19 am and is filed under Corporate Issues. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.