Provided the recently announced plans of Euroins, Holding Varna and Chimimport to raise capital Profit.bg approached three market participants with the question: Is this the right time to raise capital on the Bulgarian Stock Exchange?

Here is what they had to say:

Geno Tonev, investment consultant, Ug Market Fund Management

The moment in no way may be described as “opportune” to raise capital, not only in Bulgaria but worldwide as well. Actually, the lack of available financial resources is at the root of the financial crisis. Yet when all other options are impossible or too costly, many companies turn to raising shareholder capital.

With certain differences, however.

Firstly, in order to attract shareholders the companies have to present their priority objectives, which have to be achieved with the proceeds from the capital raise. The description has to be comprehensive, unequivocal and has to provide good grounds for the issue price of the shares.

Secondly, in the present conditions of strong declines on the stock markets and investors shunning stocks the only way to tempt the potential investors is to offer them a very good deal.

At least two of the aforementioned companies seem not have understood this very part of the situation on the capital markets.

Tsvetoslav Tsachev, manager Analyses department, Elana Trading

I would consider the moment as extremely difficult, rather that as inappropriate. The credit crisis withdrew huge resources from the capital market and the slump in prices results in the loss of confidence.

It is very difficult to raise capital in a similar market environment, including from existing shareholders. This does not mean that the moment is not right – on the contrary, to invest now, when whole enterprises are being sold cheaply and new machinery and equipment may be put to use when the economic recovery begins, seems to be the most reasonable option.

Each project will be judged very carefully by the investors and the management of the companies has to provide comprehensive information on it, or risks not to attract capital.

Branislav Ganozov, broker, Favorit

The sentiment on the capital markets at present is definitely not suitable for capital raise. The ongoing global financial crisis may be described with the lack of confidence and makes investors quite cautions.

Only large-scale and actively traded companies may rely on a successful capital raise, provided they offer attractive issue prices for the new shares.

In order for a new issue to be subscribed successfully at the present market conditions, maybe the majority shareholder and the other big shareholders should commit to subscribe their share of the capital increase.