BVB Elections: Which shareholder groups control the stock exchange?

The shareholders of the Bucharest Stock Exchange (BVB) will meet, in the middle of next week, to elect the new Board of Directors for a period of four years, as well as the president of our capital market operator, a position currently held by Radu Hanga.

BVB is 80% controlled by Romanian institutional investors, including private pension funds, SIFs, banks and brokerage companies. There is talk in the market that most of the games are already done, and the current president of the BVB will receive another mandate at the head of the stock exchange. On the other hand, certain groups of shareholders would have too many candidates for the number of votes they have.

Seventeen candidates registered for the nine seats on the BVB Council, and Radu Hanga and Dragoş Neacşu are aiming for the position of president of our stock exchange.

"Banca Transilvania, SIF2 (the current Evergent Investments) and SIF3 (Transilvania Investments) are going together", says a source from the market. "SIF1 (Lion Capital), SIF4, SIF5 (Infinity Capital Investments) and Juravle's funds (n.r. Swiss Capital) go together. The SIF1 group does not have a candidate for the position of president and it seems that it will support Radu Hanga. As Hanga comes from BT, he will most likely remain the chairman of the exchange".

• BT Group, Evergent and Transilvania Investments

Links between BT and the former SIF2 and SIF3 can be identified from the reports. At the end of September, the shares held directly by the financial group in the two companies were equal to 9.3% of their total capitalization (according to our calculations based on reports and data from the BSE), and people from BT are on the boards of Evergent and Transilvania Investments. Horia Ciorcilă, the president of Transilvania Bank, leads the Investment Committee of Evergent, and Patriţiu Abrudan, who comes from BT, is the very president of Transilvania Investments.

On the other hand, at the end of September, the most important investments as a share of assets of the two former SIFs were in Banca Transilvania shares, but they also have indirect investments in the bank's securities, through funds. BT, Evergent and Transilvania Investments have four candidates for next week's elections: Radu Hanga, Daniela Secară (proposed by the BT Maxim fund), Şerban Marin (proposed by Evergent) and Remus Vulpescu (proposed by Transilvania Investments).

"There are too many candidates for the number of votes I have", says another source.

When the applications were submitted, Evergent had 4.33% of BVB, Transilvania Investments 7.69%, and the BT Maxim fund 2.02%, according to the documents related to the AGM. Also, the Pilon III pension fund had BT Pensia Mea, in October, 0.11%. It is possible that the bank directly owns BVB shares (the bank's reports only mention that the group owns BVB-listed shares), but our sources say that BT may also indirectly control other shares of the stock exchange, through funds that do not are managed by BT Asset Management.

The data we managed to centralize shows a holding of about 14% of BVB by the BT, Ever, Transilvania Investments group (but they probably control more) and it is possible that some Pillar II funds support candidates of the group, as happened four years ago. However we take it, the elections will take place by the cumulative voting method, the board has nine seats, which in the case of a 100% quorum means that, on average, a candidate would need 11% of the votes, i.e. over 40% for four candidates.

• Lion Capital Group - former SIF-Banat Crişana

Lion Capital (formerly SIF-Banat Crişana) acts in concert with SIF Muntenia, which is recognized by the Financial Supervisory Authority, but in reality also with Infinity Capital Investments (formerly SIF Oltenia), a company whose management it took over three years ago, through - a concerted action involving funds managed by Swiss Capital, Certinvest and BRK Financial Group.

On June 30, Lion Capital had 5.1% of BVB, Infinity Capital Investments 8.6% and SIF Muntenia 4.47% plus the 0.03% holding of the Plus Invest fund, managed by SAI Muntenia Invest. Thus, if the holdings remained the same, the Lion Capital group has 18.2% of the stock market, but taking into account the practice of placing money in funds that they control and which, in turn, have BVB shares, it is possible to hold more a lot.

Nicu Buică, director of SAI Muntenia Invest, is one of the group's candidates for the BVB board, along with Robert Cosmin Pană, one of the current BVB vice-presidents, who comes from Swiss Capital and SIF Muntenia. After the concerted action by which Lion Capital and SIF Muntenia took over Infinity Capital Investments, the Pilon II pension funds fled from the shareholding of the former SIF Oltenia, so that probably the group coordinated by Lion does not have much support among them.

• Pension funds and banks

Pillar II pension funds had, at the end of September, 20.5% of BVB, while Pillar III funds held about 1.3% of our capital market operator. But, the funds did not explicitly name their representatives on the board of the exchange.

It would be logical that the funds whose parent banks proposed candidates to the BVB board should vote for them.

The candidates registered by BCR are Cristian Pascu - deputy executive general director and Valerian Ionescu - Head of Product Management Investments Products of the bank, but according to sources Ionescu is no longer running.

"BCR had too many candidates for the number of votes it has," according to the sources.

From the bank's annual report, it appears that the institution has shares on the BVB, it also controls 3.9% through the pension funds it manages, plus two mutual funds managed by Erste, which in the summer had 1.2%, according to the data I have managed to collect them.

Claudia Ionescu, who is part of the current board and is running for a new mandate, comes from BRD, a bank that directly owns stock exchange shares, as explicitly stated in the institution's last annual report, to which we can add some small packages of shares held by the pension funds administered by BRD.

However, the largest pension fund holdings were, in September, those managed by NN, with 7.4% of BVB shares, those managed by Aegon - almost 5.5% and Metropolitan Life - 3.9%.

• Brokers and other shareholders

Some brokerages have BVB shares, and on the list of candidates is Dan Paul, president of the Brokers Association and one of the current vice-presidents of the BVB. Also, Octavian Molnăr from IFB Finwest is another candidate for the position of administrator of the stock market from the brokerage area.

Răzvan Raţ is the deputy general director of BRK, but the company is not a member of the Association of Brokers, and in the past it acted in concert with the former SIF Banat-Crişana and SIF Muntenia.

Other aspirants for the position of member of the BVB Council are: Laviniu Beze, president of the Capital Market Investors Association (proposed by Ioan Gheorghiu, deputy manager at Amundi Asset Management); Loredana Chitu, partner, capital markets practice coordinator at Dentons (proposed by OTP Asset Management); Simona Fătu, governance and ESG consultant (proposed by Narcisa Oprea, partner of Schoenherr Attorneys at Law); Vlad Deliu, financial director at Softbinator Technologies (proposed by former broker Mihai Chişu).

Investment funds are also found in the shareholding of our capital market operator, for example Raiffeisen Romania Dividend held, in June, 1.3% of the stock market, while Romanian individual investors have about 16-17% of the Bucharest Stock Exchange.

The mandate of the new members of the BVB Council will begin after the individual approval by the Financial Supervisory Authority and the contracting of personal liability insurance, but not earlier than February 13, 2024, when the mandate of the current board members of the exchange expires.

Note: At next week's meeting, those who held BVB shares on October 9, 2023 will be entitled to vote, so perhaps some holdings on that date were different from those we identified in the reports.