Companies don't want to list on the stock exchange even if they are paid

The program to support the development of private companies in our country through stock market listing, launched by the Romanian Government through the Ministry of Investments and European Projects, is of almost no interest to entrepreneurs.

Having reached the second round of calls for projects, the financing program under the National Recovery and Resilience Plan (PNRR) aims to support at least 280 companies, offering them financial support for attracting capital or selling share packages through capital market mechanisms, followed by listing on the Bucharest Stock Exchange (BVB), according to the program guide. However, after the first call for projects two years ago, only three financing contracts were concluded, but none of the companies completed the listing process, and in the current call for projects, by February 21, three companies had registered, one of which was rejected, as the Ministry informed us.

• Broker: "I don't think it's anyone's fault that the program doesn't work; there are actually other criteria based on which a company makes a listing decision"

A broker with experience in our capital market says that the first stage of the program, which was limited to one month, was a failure precisely because of the short time - companies did not have time to convene shareholders, prepare documents, etc. "Now the program has been extended to one year, which is very good, but a company does not list on the stock exchange for just a few tens or hundreds of thousands of euros", he pointed out.

The first stage of the call for projects took place in March-April 2023, offering financing of up to 200,000 euros for companies aiming to list on the BVB Regulated Market and a maximum of 25,000 euros for those interested in the AeRO Market. The current stage began in June last year and will end in May, with financial support reaching up to 300,000 euros for the Regulated Market and 70,000 euros for AeRO.

The broker added: "Listing is a strategic decision, which depends on the maturity of a company's thinking. Companies are interested in attracting money for development, in the fact that through listing on the stock exchange a major investor like Dedeman can become a shareholder or that they can implement stock-option plans to retain key people in the company. From the discussions we had, we noticed that companies are particularly interested in granting shares to staff, expanding through acquisitions and attracting a strategic shareholder to contribute to business growth. We did not notice a significant interest in this type of support," the broker pointed out.

However, through this program, the rulers have given the signal that they are thinking about developing the capital market, which is to be appreciated, he says, adding: "I don't think it's anyone's fault that the program is not yielding results; there are actually other criteria based on which a company makes the listing decision".

• "If it had existed four or five years ago, the program would certainly have been used; now it is a completely different situation," according to a market opinion

The broker's opinion is also shared by another important player in our capital market, who also emphasizes the uncertainty of the economic and political climate as an element that probably determines entrepreneurs to postpone the listing decision.

He told us: "Financing through the PNRR may represent a welcome support, but it is not the factor on which companies make the listing decision. If it had existed four or five years ago, when companies were rushing to the capital market, the program would certainly have been used and probably all the money would have been consumed. And the amounts, especially the 300,000 euros for the Regulated Market, are substantial. Now the market is in a completely different situation. The second half of last year was an electoral period that is extending into the first half of this year. There is great uncertainty on the political scene and I think this is the main reason why companies are not taking the step towards the stock exchange now".

The decision to list is based on a combination of factors, of which perhaps the most important is the potential that the company has, because it has to offer something to investors, the stakeholder says, adding: "Now, companies are probably waiting to see what is in store, from a political, fiscal, etc. point of view".

From his point of view, the program would have been much more useful if, in addition to financing the listings, part of the money had been focused on population education programs. "For example, carrying out sustained campaigns in the press to explain basic things - what investing in a listed company means, what dividends are, etc. We need to focus on increasing the financial education of the population, so that the capital market becomes something common and the number of investors increases, because we have much greater potential. "It would be a win for the economy in general, because companies could finance themselves much better, jobs would be created, and people would directly benefit from the investments they would make. In addition, with the increase in the level of financial education of the population, perhaps the frauds we keep hearing about lately would no longer occur," the stakeholder told us.

• IT Genetics, Graffiti Plus and Teleson - the companies that had registered for the program by the second half of last month

IT Genetics, Graffiti Plus and Teleson are the three companies that had registered by February 21st in the current round of the call for projects within the program. For IT Genetics, the file was approved, and the company is in the phase of contracting the financing. The file submitted by Graffiti Plus was in the evaluation phase, while the Teleson file was rejected, according to information sent by the Ministry.

Artificially created clip by MAKE

Interestingly, IT Genetics participated and concluded a financing contract within the first call for projects, but did not complete the listing process. Axionet IoT and Microfruits are the other two companies that concluded contracts in the first phase, but did not list, and the implementation period, that is, the one in which the companies had to operationalize the activities provided for in the financing application, has expired.

IT Genetics, one of the finalists of the BVB Arena 2024 program, is a provider of hardware and software solutions on the DC/POS (data collection and point of sale) market, operating in Romania as well as in Hungary, Bulgaria, Spain and Italy. It was founded in 2007 by Ştefan Axinte and Liviu Mihai Sima, who each own 50% of the company, and in 2023 it had a turnover of 70.6 million lei, 20% more than in the previous year, while the net profit amounted to 2.5 million lei, four times higher than in 2022. The average number of employees in 2023 was 55, according to Termene.ro.

IT Genetics did not respond to our request regarding the reasons why it did not complete the listing after the first call for projects and details about the current status of the process. Neither Microfruits nor Axionet IoT provided information about the reasons why they did not proceed with the listing after the conclusion of the financing contract in the first call.

Graffiti Plus is a consulting agency for brands and businesses relevant to society, controlled by entrepreneur Cătălin Chiş. In 2023, it had a turnover of 36.9 million lei, slightly below that of 2022, while net profit amounted to 1.64 million lei, 26% lower than the previous year. The average number of employees was 74, according to Termene.ro. The company announced yesterday its intention to list on the AeRO market of the BVB.

• Companies interested in financing for stock market listing can submit their applications until the end of May

The call for projects "Listing of enterprises on the stock market" is addressed to Romanian companies with majority private capital and is of a non-competitive type, with continuous submission until May 31, 2025.

Applications for funding are evaluated according to the "first come, first served" principle, according to the program guide. The call can finance direct costs, part of the technical process of attracting capital: legal services, financial audit and financial-accounting consultancy, costs of intermediaries and market institutions, costs related to promoting public offers, as well as the acquisition of consultancy services for the sustainability report and ESG rating. Companies can also cover their indirect costs associated with their presence on the capital market, namely the professional training required for management and employees on certain topics.

The amount of funding allocated represents a maximum of 70% of the eligible expenses, but no more than 8% of the value of subscriptions to newly issued shares following an initial public offering, a mixed offering or a private placement. The difference between the total eligible expenses of the project and the non-reimbursable financial aid awarded represents the beneficiary's own contribution or co-financing of eligible expenses.

The call for projects "Listing of enterprises on the stock exchange" is financed through the National Recovery and Resilience Plan and from the state budget, the total amount available being 38.3 million euros, of which 34.8 million euros financed from the Recovery and Resilience Mechanism and 3.5 million euros from the state budget, representing the non-deductible VAT value related to eligible expenses, according to the program guide.