The Privately Traded Whirlpool Of The South Caucasus

When we talk about stock exchanges, big extravagant trading strategies, months of preparation, and billions of dollars in revenue, we don’t really think about companies in Eastern Europe, do we? Well, good on that because there’s no such thing in the region we are about to discuss, even though it does have some publicly traded companies.

The South Caucasus region consists of 3 countries: Georgia, Armenia, and Azerbaijan. All 3 of these countries have their own focuses and valued industries, but not all of them are equally successful.

Georgia, for example, completely focuses on its tourism industry, therefore taking one of the biggest hits in the recent pandemic. Azerbaijan clings to its oil reserves, building most of its economy around what it currently has and Armenia is very heavy on the agricultural side of the industry as well as energy production.

Georgia is arguably the only country out of these 3 that did not model its economy around the remnants of the Soviet Union. Armenia is currently benefiting from dozens of old Thermonuclear power plants left behind by the Soviet Union after it fell apart, while Azerbaijan had to do very little in terms of oil production as almost everything was already set up.

Georgia on the other hand can only rely on its amazing nature and massive export of wine. But, for some reason, this country has all the wrong companies listed on exchanges which we are about to discuss.

As soon as we’ve mentioned the general idea of the public market in Georgia, we will move on to the privately held companies which are quite surprising.

Only a few companies on the exchange

In order to remain as fair as possible, we need to discuss the number of Georgian companies listed by stock exchanges outside of Georgia. There are 2 companies that come to mind immediately. These are TBC Bank and Imedi L.

The first is, obviously a bank while the other is an insurance company. These two companies are arguably the most traded among the 138 shares featured on the Georgian exchange, which kind of throws every perception of the country’s economy into jeopardy. A country of 3.7 million people would not necessarily resonate with so many financial products to a point that they would find themselves on the London stock exchange, right? Well, it’s reality.

Most Georgian citizens have some form of debt to a bank or a microfinance organization. They then ensure these funds with insurance providers like Imedi L, thus creating this circular process. The more the citizen borrows, the larger the insurance they have to take, thus making these 2 companies the most traded in the country.

However, there are similar-sized companies operating in the region that have a lot more customers and a lot more reach to international markets, yet they remain privately traded or have not reached beyond the Georgian stock exchange. Let’s discuss them next.

Privately traded or refrained to local exchanges

The first company that comes to mind when we mention privately traded is Adjara Group, the largest online iGaming company in the country and most likely in the region as well.

Based on information gathered from www.onlinecasinos.ge, a local iGaming media outlet, Adjara Group is also the most visited website in the country and features around 3 million unique visits every single month. Considering that there are 3.7 million people living in Georgia, it’s unlikely for all of them to be locals, thus solidifying Adjara’s title as an international company even further.

However, the company does not allow its stocks to be featured on the Georgian stock exchange neither on any other exchange. It is fully privately held. One thing that did change about it was in recent years when Paddy Power (PDYPY) bought 50% of it in one go.

And why wouldn’t they? The casino has been enjoying steady growth over numerous years with nearly a 50% increase in the last year alone.

So this begs the question. Why wouldn’t Adjara Group display itself on a public exchange? Well, it’s quite simple really. They don’t really need funding at the moment. Their operations are already top-notch and do not require too much innovation, nor do they have any serious international projects planned for the future. Their current costs mostly include marketing campaigns, staff, and rent.

And in terms of the relatively lower traded companies, we can bring Teliany Valley. And although this company is one of the highest traded in the country, they just can’t come close to companies that are registered on international exchanges and who have pretty much the same reach to international markets.

One would think that the cradle of wine would have the biggest wine company, but unfortunately, it does not.

That concludes the whirlpool that Georgia has found itself in. The only real way that business models change in the country’s largest companies is if the public has a say in their operations. That usually happens through stock sell-offs or buy-ins.