AISIF: "Lion Capital is an extremely undercapitalized company"

Lion Capital (formerly SIF Banat-Crişana) is an extremely undercapitalized company, its shares trading at a discount of approximately 70% compared to the Net Asset Unit Value, say the members of the Association of Investors in SIFs (AISIF).

It is a reaction to the position of the Lion management according to which the requests of the shareholder Blue Capital, which wants the company to distribute half of the profit as dividends and to buy back 50 million of its own shares, which will later be cancelled, so that the trading discount is reduced and the profit per share increases, risks excessively decapitalizing the company.

In the press release, AISIF mentions: "The clarifications of the management of Lion Capital (former SIF Banat-Crişana), regarding the legitimate requests of the shareholder Blue Capital for the distribution of dividends and share buybacks, suffer from a major omission. Every year Lion's management proposes to shareholders increasingly higher remunerations for themselves, calculated according to net book assets, in the form of cash and free shares. The shareholders holding the majority vote in the General Assemblies are funds controlled, directly or indirectly, also by Lion's management. These funds include SIF Muntenia and Infinity Capital Investments (formerly SIF Oltenia). Of course, no opposition.

The proposals are voted on every time, without any concern for the actual shareholders. Now, Lion's management seems concerned that if it offered dividends and buybacks to shareholders, the company would be decapitalized. In reality, however, Lion is an extremely undercapitalized company, with shares trading at a discount of around 70% to net assets. Lion's management receives free shares calculated according to the size of the company's net assets, which have increased not because of performance, but because of the non-distribution of dividends to shareholders".

• AISIF: "It is not surprising that the pension funds left the former SIF Banat-Crişana, Muntenia and Oltenia"

The association points out that the real shareholders of Lion Capital, not those built from buying own shares through interposed funds, are dealing with a 70% discount compared to the net asset. "Real shareholders do not receive dividends and if they want to sell from the shares they own, they have to deal with a ridiculous price in the market. So, under current conditions, Lion's vaunted net worth (by management) does nothing to help shareholders. Instead it helps management, which is rewarded by net asset rather than share price, as would be right.

It is not surprising that the pension funds left the former SIFs: Banat-Crisana (LION), Muntenia and Oltenia (INFINITY). A sad situation not only for the shareholders of these listed companies, but for the entire capital market where such harmful practices for investors are allowed," AISIF members say.

Blue Capital, which owns 8.63% of Lion Capital, requested that the former SIF Banat-Crişana allocate dividends in the amount of 208.6 million lei, plus a program to buy back up to 50 million of its own shares, which to be canceled for the reduction of the share capital, an operation that the management of Lion estimates at 147.5 million lei.

"The resolutions proposed by the shareholder Blue Capital, both on the agenda of the ordinary general meeting and on the agenda of the extraordinary general meeting, risk leading to an excessive and unjustified decapitalization, exposing the company to situations of high vulnerability and increased liquidity risk", the Lion Capital press release states.

The management of the former SIF Banat-Crisana claims that it had a prudent and balanced approach, focused especially on capitalization and development, which made Lion have the highest value of assets under management among the investment funds listed on the Bucharest Stock Exchange , within the BET-FI index.

But the shares are currently trading at a 66% discount to net assets, which Blue Capital says primarily reflects investors' lack of confidence in the company's management team. "Lion Capital is positioned as the main competitor in the unfortunate top of the FIA with the biggest discounts from BVB", says the shareholder.

The points requested by Blue Capital are on the agenda of the ordinary and extraordinary meetings of Lion Capital shareholders on April 29, along with the proposals of the Council of the former SIF Banat-Crişana, which wants all the profit of 417.2 million lei to be distributed to " Other Reserves" and to carry out a buyback program of its own shares, which it will grant to itself for free.

Last year, Blue Capital was 65.85% owned by Macelia Investments from Cyprus, according to Risco.ro. Behind Macelia is the Bîlteanu family.