Saleh Al Falah

Since this is the first post of many posts (InshAllah), I hope that it will be short and sweet. This post is dedicated to all KSE traders and investors.

Let us begin…

When Mr. Saleh Al Falah took over the reigns of KSE’s management a few years ago, a number of distinguished eyebrows were raised as a result since his predecessor was known to be very lenient with KSE’s big players and a number of rules were bent for their sake. It became obvious that Mr. Al Falah came with an iron fist and refused to cave in to pressure from the fat cats of Kuwait Stock Exchange.

The first signs of trouble were evident when many shareholders failed to disclose their ownership in a transparent manner. Mr. Al Falah swiftly ordered the suspension of all ownership rights of those shares for a predefined period of time. Many large shareholders caused quite a stir, a number of lawsuits followed. When many unlisted companies were refused listing in the market, the public campaign against Mr. Al Falah intensified. We kept hearing about the ’61 companies’ bloc’ which increased to 76 companies, they were very loud with their demands.

We must also keep in mind the major role the media played during this debacle. The demands of disgruntled companies had huge coverage with many thick columns being allocated to their cause. What we saw was akin to propaganda since most of the newspapers are owned by KSE investors or have close ties with them. A number of press conferences were held by Mr. Al Falah but they failed in changing public opinion.

The media somehow forgot to mention the many virtues that Mr. Al Falah possessed. He was the official demanding more information, more transparency from companies when they announced results. In the past, it was enough to just announce the net profit and unrealized gain/loss but now we find dealings with related parties. Recently, a mini balance sheet is required – which included current and non-current assets and liabilities as well as stockholders’ equity. I think this is a very good move since it takes ages for companies – after announcing their results – to publicly to release their statements.

During Al-Falah’s tenure, announcement deadlines were set for listed companies (within 45 days) after the end of each quarter. We had instances in the past where some companies delayed announcing their yearly results for months. Huge and unnecessary capital increases are also frowned upon; if companies decided to increase their capital without providing economically viable reasons, then trading of its shares would be suspended for a whole year.

When unusual trading revolves around certain stock, KSE would stop trading to check if there was any insider information, if that was the case then all trades on that company would be canceled. ‘Wataniya Telecom’ was a prime example of that. With regards to the listing, or otherwise, of Kuwaiti companies in the stock market, I think the refusal of some of the companies is of greater benefit to investors in the long term.

I do believe, however, that some of the allegations forwarded by certain companies do have some truth. One example being KSE has complete rights to refuse a company listing without offering any reasons to the company – this is wrong. Even if the owners of the company are aware of the reasons, the poor investors know nothing. KSE must publicly issue the reason behind the refusal so that everyone is informed.

Another incident during Al Falah’s leadership was when KSE threatened to suspend trading if the owners went ahead with the merger between ‘Jeezan Holding’ and ‘Kuwait Holding’. ‘Kuwait Holding’ was refused listing in the market, reasoning being due to the merger – ‘Kuwait Holding’ could have been listed in an indirect way anyway. KSE’s reasons might have been valid but the threat of suspension came at a very, very late stage.

Despite his flaws, I think that Saleh Al-Falah is really the man capable of guiding the Kuwait Stock Market to the next level. I think that the main reasons behind the campaign to replace Mr. Al Falah was due to the fact that many juggernaut companies were used to preferential treatment and had difficulty adjusting to the new realities concerning transparency guidelines.

During this ongoing financial meltdown we detect a deafening silence from the ‘opposition party’ since they have problems of their own that need immediate attention. I just hope that when the crisis is over, they won’t revert back to attacking Mr. Al Falah.

PS. At the outset of this piece, I said that it would be short and sweet. Apparently, I failed miserably at both! 🙂