At the moment more than 20 Bulgarian companies are willing to sell part of their capital or to raise funds on the stock exchange. While the introduction of new investing companies was considered exceptional till recently, it may now turn to be something quite common. More and more companies are willing to be listed on the stock exchange which of course is an alternative way to invest accrued finances.
Cashing through the stock exchange is an alternative to bank or bonds loans. While bourse listing used to be a taboo for most companies in the past, during the last two years it has turned to a very popular means of financing a company and the number of companies listing on their own will is increasing. Experts are envisaging even brighter future for this bourse segment.
Statistics talks best about the new trend in corporate Bulgaria. Only last year quite a few of the biggest Bulgarian companies decided to be listed - Euroins, Bulgarian American Credit Bank, Monbat and Chimimport are some of these.
“One of the main reasons for the growing interest in the stock exchange is the development of the capital market in the country,” says Rumen Sokolov, a BSE chief expert. “During the past year Bulgarian economy sees a stabile growth which was reflected by the equities market. The market stability attracted a lot of interest from institutional and individual investors as well as from issuers (companies offering stock on the bourse)” Sokolov also added.
What is coming up
At the moment there are over 20 companies who have announced their will to be listed as public companies on the BSE.
The IPO of the sixth biggest bank in Bulgaria – First Investment Bank is the first to come. It is announced for the period 7 May to 18 May. The bank will increase its capital from 100 mln to 110 mln leva. One of its shareholders will offer another 5 mln shares and an additional 1.5 mln in case of high demand. Meanwhile Corporate Commercial Bank IPO will start May 10. The bank is offering 1 mln shares with a face value of 10 leva. Minimum price is set at 45 leva and maximum price at 58.50 leva.
The list of companies willing to become public and having already taken steps towards that includes companies from various sectors of economy. Interest has been announced by some IT, Internet and media companies – these are Special Business Systems, Netinfo, M3 Communications Group, Bulgarian Publishing Company. Companies from the financial sectors are also expected – Investbank and the insurers Lev Ins and Armeets. Companies from the fields of meat processing, bakery business, insulation, woodworking and many others are also expected to join.
We see a lot of fresh inflow according to Miroslav Stoyanov, Investment Banking director in the brokerage Elana Trading. What we used to see in the past were tender offers by major shareholders who bought the remaining stake and made the company non-public again. One reason was that because of a change in the law, more than 1000 companies in the past were forced to become public against their will. Nowadays you hear the words “bourse listing” more and more often at meetings. According to Stoyanov this is largely due to the fact that the capital market now offers opportunities to raise enough capital for businesses of the size they are in Bulgaria and the procedures are not that risky.
Biliana Valkova, Investmank Banking Executive in Benchmark Group also agrees that the reason why companies wish to get public status is mainly to be able to use the financing opportunities for investment programs that the capital market can provide. The Bourse listing allows for improvement of liquidity for shareholders and boosts the company’s image. Not in the last place, companies’ owners prefer the public status because it allows them to cash the remaining part of the investment without losing control of the company, Valkova also added.
“Listing also gives companies better image before business partners and investors. Besides, the market gives an accurate and independent evaluation of each company, makes mergers and acquisitions easier, offers more business opportunities. The specialized media attention is not to be ignored – it focuses first on news about public companies which is a kind of free publicity for them,” Rumen Sokolov also pointed out.
How to become a public company?
In order to be listed on the Stock Exchange companies have to follow a number of procedures which take about half a year – they have to prepare a prospectus, which needs to be approved by the Financial Supervision Commission. Then they register the stock for trade. Also, they must be joint-stock companies.
There are to ways to start trade. One is via a secondary public offering of shares and the other is via an initial public offering (IPO). The first way means that the major shareholder sells its stake in the company allowing other shareholders in.
An IPO means that an increase in the current capital is being made. New shares are issued and the investors who buy them become shareholders. For example, if a company whose capital is 10 mln leva wishes to increase it to 12 mln leva it will have to issue 2 mln new shares and offer them to investors. If the current owner does not subscribe any of them (which is not always the case) this means that 16 % of the company’s capital will be owned by other investors.
All advantages of the public status, however, are accompanied by responsibilities. According to the Law for public offering of equities public companies need to present financial statements every three months as well as one annual financial statement. They have to notify the Financial Supervision Commission about each event such as changes in the management bodies and other amendments in due time. Public companies have to hold general meeting of shareholders which need to be announced in the State Gazette and two other national newspapers.
Some companies have decided on transforming their structure into a public company as part of their investment strategy. Such is the case with the engineering company Enemona.
“A few years ago we decided to become a public company in 2007,” said Prokopi Prokopliev, Corporate Strategy Director and member of the Board of Directors of the bank. “This was required by Enemona’s development strategy till 2011’ he added. At the moment the brewery Lomsko PIvo is controlled by Enemona. Lomsko Pivo is not part of the long term strategy of Enemona and that’s why the company will use the stock exchange to find a strategic investor for it. The stock exchange will show the brewery’s real market value .
The Bulgarian Stock Exchange itself is trying to attracting new investors. During the last couple of months the BSE held two meetings with companies and investment intermediaries in Varna and Veliko Turnovo with the aim of attracting new issuers. Another one is to be held in June in Plovdiv. By attracting new companies the BSE is aiming at maintaining the interest of the investing community since more variety means more chances for investors to increase their chances for profit.
Potential initial or secondary public offerings:
|Initial or secondary public offerings|
|In May:||Also intending:|
|First Investment Bank||Nilana|
|Corporate Commercial Bank||Mekom|
|Next:||Sofia Commerce Credit Group|
|Specialized Business Systems||Papas Olio|
|Darvoobrabotvane VT||Sopharma Trading|
|This autumn:||Already completed in April|
|Unifarm||First steps taken in 2006|
|Bulgarian Publishing Company||Monbat|
|M3 Communications Group|
Written by Kristian Kostov, profit.bg and Tatyan Puncheva, dnevnik.bg