SMALL INVESTORS HAVE OVERSUBSCRIBED 15 times THE NUMBER OF SHARES ALLOCATED TO THEIR TIER Gabriel Dumitraşcu: "The subscriptions on the small tier in Romgaz are speculative"

Small investors have set aside 941.59 million Euros for the Romgaz IPO, according to data sent in by the brokers by 18:00 yesterday. Demand was double the value of the stake put up for sale by the state and over 15 times the segment which was allocated to them. The number of orders soared yesterday, on the last day of the IPO, when the schedule ended at 13:00, after the small tier had been oversubscribed 5.4 times on Wednesday. Banks have offered their customers credit facilities to allow them to subscribe in the IPO. Given the oversubscription, investors had the possibility to raise the amounts of the order, in order to ensure that they get a stake of a size as close to the one that they wanted as possible, without having to bring in their own money.

Gabriel Dumitraşcu, the head of the privatization division of the Energy Department, told us that the rise of the subscription rate on the last day of the IPO is speculative.

He said: "I don't think it is beneficial for the health of the stock market to have well-versed people speculate to the detriment of the small investors of good faith, to make sure that they get as many shares as they wish. We have to act drastically so that this phenomenon doesn't happen again".

According to the prospectus of the Romgaz IPO, if both tiers are oversubscribed at the end of the IPO, and the percentage of oversubscription of the small investor tier is two times higher than the on the institutional investors tier, a block of shares representing 5% of the IPO, will be automatically relocated from the major investor tier to the tier for retail investors.

"We will perform this transfer", said Gabriel Dumitraşcu, who added: "We would have done it anyway, given Wednesday's oversubscription". The prospectus allows for reallocations between the two tiers, depending on the issuer and the underwriters. Mr. Dumitraşcu did nor want to provide us with details on an additional reallocation: "We will only begin these talks with the underwriters' syndicate. You will find out all the details concerning the allocation and the price tomorrow (ed. note: today), in the press conference".

In summer, Gabriel Dumitraşcu said that the Romanian state should sell the 15% stake in Romgaz using Global Depository Receipts on the London Stock Exchange, because conducting the IPO on the Bucharest Stock Exchange alone would not provide enough money. The authorities were saying at the time that they were looking to raise a maximum of 600 million Euros for 15% of Romgaz. It would seem the market has made it its goal to disprove Dumitraşcu's opinion.

The Romgaz IPO saw record orders on the small investor tier - one of 38 million Euros on Wednesday, and another of 44 million Euros on Thursday.

The Department of Energy of the Ministry of the Economy has scheduled a press conference for today at 10 AM, to announce the result of the Romgaz IPO.

According to sources in the market, the number of shares subscribed on the tier for institutional investors is nearly double the number of shares available.

On the retail investor tier 130,352,231 shares have been subscribed, of which 30,648,508 discounted shares, through 10.548 orders, and 99.704.823 in 1,122 orders, without discount, by 18:00 hours yesterday, according to brokers.

Retail investors have bid 4,171,271,392 lei (941.59 million Euros) more than 2.26 times the maximum amount that the government was hoping to earn from selling the 15% block in Romgaz. Depending on the price at which the transaction will be carried out, the State would collect between 1.38 billion lei (311.7 million Euros) and 1,85 billion lei (415.6 million Euros).

Some brokers in the market share the opinion of Gabriel Dumitrascu, that the subscriptions on the retail tier are mostly speculative, and to a large extent the result of loans or guarantees provided by banks and the state.

As a matter of fact, the ASF has took action of its own accord on Wednesday, asking brokerage firms to urgently send it the amounts of their equity and the trial balances, to check whether they have overexposed themselves to the Romgaz IPO, according to some voices in the market. Cătălina Sava, Head of the Stock Market Oversight Department at the ASF, however, claims that the measure has no connection to the Romgaz IPO and that the measure is only proactive.

• Ludwik Sobolewski is very pleased

Ludwik Sobolewski, the CEO of the Bucharest Stock Exchange considers that with the IPO of Romgaz, the Romanian stock market is joining the global market.

He said that he is pleased that many Romanians have subscribed in this IPO, and he said that the position of the BSE has always been that the local demand for shares of Romgaz should not have been underestimated, when the plan for this important transaction was conceived.

The CEO of the BSE reminded the fact that the position of the Exchange was that the institutional investors would not want to buy just Global Depository Receipts of Romgaz, which are tradable outside Romania.

Ludwik Sobolewski considers this stage is crucial for the transaction and noted that a significant number of leading investors are interested in getting involved in and buying shares in the company.

Marcel Murgoci, head of operations at brokerage firm "Estinvest Focşani," believes that government officials did not have enough confidence in the potential of the Romanian stock market and that this high degree of oversubscription should serve as a lesson to them.

He told us that it would have been a good thing if a greater number of shares had been allocated for the retail investors tier in the Romgaz IPO.

Marcel Murgoci told us that in the last days of the IPO he noticed a substantial increase on the tier for small investors without discount (with orders of over 10,000 shares) precisely because the time of the orders on that segment did not matter.

The Estinvest analyst considers that some brokerage firms and banks helped investors subscribe in the Romgaz IPO, in compliance with the law.

Simion Tihon, a broker at "Prime Transaction" told us: "The tier for small investors was oversubscribed 15 times, a situation which I doubt many expected before the IPO began. Given that investors will receive very few shares compared to the number that they have subscribed, if the stock were to perform poorly once it starts trading, I don't think this would set a good precedent for the future IPOs". He has also said that our market has proved that it can handle such offers without a hitch, even if the level of subscriptions was the consequence of a chain reaction.

Through the Romgaz IPO, the Romanian state is looking to sell 15% of the nation's natural gas maker.