Important warning to investors from the CMB Chairman: Do not take out loans to invest in the stock market

Capital Markets Board (CMB) Chairman İbrahim Ömer Gönül made important statements regarding initial public offerings (IPOs), which have recently been on the public agenda.

According to a report by Milliyet, Gönül warned, "We have determined that individuals who form groups on social media to direct investors are profiting from this. Do not trust those who make such posts on social media. If you are trading in the short term, do not take out loans to enter the stock market. Do not trade based on rumors and tips."

CURRENT IPO DATA

Gönül provided the following information regarding current IPO data:

“As of the end of September this year, the initial public offering prospectuses of 34 companies have been approved. 33 companies have started trading on the stock exchange. The process for one company is ongoing. The amount these companies have raised from the market has exceeded 47 billion liras.

Developments on the side of companies going public have also brought records in the number of investors. The number of investors in the equity market was 2.4 million and 3.8 million at the end of 2021 and 2022, respectively. As of the end of September 2023, the number of investors in the equity market rose to 7.8 million.”

Gönül stated that around 80 companies with potential are waiting to go public, and among them are companies that could reach an IPO size of 6-7 billion liras. Gönül answered a question regarding new instruments in capital markets as follows:

“We have a real estate certificate project. In previous years, it did not receive the desired level of interest. Now, we will support this project more strongly together with municipalities, our public institutions, and the private sector. It is an instrument that will provide significant financing for urban transformation and disaster management, and where investors can also evaluate their savings. We also have a Real Estate Project Fund study. Unlike the Real Estate Investment Fund, we will provide these funds with the opportunity for real estate development.”

WARNING REGARDING ‘CEILING’ EXPECTATIONS IN IPOS

When asked, “The fact that shares hit the ceiling consecutively in initial public offerings attracts investors. However, it is observed that stock manipulation is being carried out on social media channels. What warnings and advice do you have for savers?”, İbrahim Ömer Gönül replied:

“As a result of our surveillance and inspection activities, we also detect that stocks are being marketed through social media channels, membership-based groups, and chat rooms. In 2023, as a result of our investigations into market-disrupting actions, we imposed a total of 171 million liras in administrative fines on 66 natural persons and 10 legal entities. In addition, criminal complaints were filed against 9 natural persons for the crime of market fraud. A temporary trading ban measure was applied to 147 natural persons. Our efforts to prevent actions aimed at disrupting the market and to implement penal sanctions continue with determination.”

"DO NOT TAKE OUT LOANS TO ENTER THE STOCK MARKET"

We have also determined that individuals who form groups on social media to direct investors profit by selling the shares they own thanks to the demand they create for those shares within the group. We have seen that those who direct investors within groups, with the “buy” recommendation they give, simultaneously sell the shares they or their associates own at a high price to make a profit, thereby causing losses to investors. Therefore, do not trust, do not respect, and do not take into account those who make these and similar posts on social media. If you do not know the stock market, consult professional institutions; let them guide you. If you are trading in the short term, definitely do not take out loans to enter the stock market.

‘NO ONE CAN GIVE A GUARANTEE’

Our Board does not interfere with market pricing. There are investors who come to the stock market with the hope that “it will hit the ceiling in the initial public offering.” Neither we nor anyone else can give such a guarantee. Prices are formed by the supply/demand balance. Due to the intense demand for initial public offerings, prices may form at very high levels. However, it should not be forgotten that when this intense demand stops at some point, there will be a stabilization in prices.

THE MEASURE THAT CAN BE APPLIED AS A LAST RESORT

I would like to ask investors: “A company is going public. Is the investor buying it because they really know the company? Are they looking at the prospectus? Are they buying it because it will hit the ceiling?” Perhaps a large portion buys it because it will hit the ceiling. I would like to warn our investors again. Invest for the medium and long term, examine the financial statements of the companies, and get professional support if necessary. Do not trade based on rumors, hearsay, and tips. Especially for initial public offerings, examine the prospectuses, financial statements, and reports approved by the CMB in detail.

In our investigations, we witness that stock manipulation is carried out under the name of education on social media. We are aware of accounts that directly market stocks. If the relevant person has profited, we impose an administrative fine and file a criminal complaint. The measure that can be applied as a last resort is the closure of the social media account.”

News Source: 12punto