Just give it to them

The AGA of the BVB is in just over a week"s time. So it is too late to put forward any new resolutions. However, in the current climate of dissonance and confusion which precedes the AGA, it may be useful for those interested in the future of the Exchange, rather than solely of their own business, to have in their pockets a Plan for what they could do for the Good of the Exchange, if they were to be in a position to do any good, following the elections to the Consiliu de Administratie at the AGA.

This article is the first of a series in which I intend to examine this question of the "Good of the Exchange", starting with the immediate issues, moving on to the medium horizon, and finally, looking at the Exchange in a broader economic context.

In the early days of the BVB, much work was done to create a business plan which would ensure the financial viability of the Exchange in coming years. Little did we think that management would be so successful in this as to make the BVB so cash rich as to be vulnerable to speculative interests. But then we did not envisage the BVB would be listed, or at least not quite so soon - a topic for separate discussion.

There are strong rumours circulating at present about certain interests which are thought to be working, if not together within the meaning of the Act (and which legally would therefore need to be declared) then at least through some communicated understanding, to transfer control of the BVB into other hands not least in order to gain control of the cash sitting in the BVB"s account, It is likely they will attract considerable support from those members who are looking to sell their shares to gain the benefit of its cash, without taking into account the implications for the future of the Exchange and how that would impact on their business, whether they be brokers or investors.

(At this point, note that I am studious in trying to avoid any pejorative or even argumentative statements for or against such actions, for the time being at least).

For those who wish to maintain the broad status quo, and even to take steps to protect it, ie the position that the BVB should remain independent as a matter of principle, it might be wise to appear at the AGA with a well prepared Plan. And to announce that Plan very loudly. They could say: if you vote for the continuing independence of the BVB, this is what its supporters will promise at another General Meeting. It will be proposed to:

- distribute immediately all or most of the cash available to existing shareholders, reserving only such amounts as need to be allocated for specified capital expenditure;

- pass a resolution which says that, in the event of an Offer being made for the BVB or an otherwise notifiable change in control of the BVB, most of the accumulated, but unallocated, cash at that moment shall be distributed to existing shareholders;

- pass a further resolution to set up a special capital account where funds would be allocated solely for capital expenditure, and for that expenditure to be specified;

- pass a resolution which more closely defines the purpose of the Exchange, which is primarily to serve the interests of both members and clients of the BVB in the context of the Romanian market, and, as a condition of that, to be seen to be acting at all times independently and in the best interests of the Romanian market as a whole. So that any change in its ownership which might be detrimental to that purpose and to the BVB"s independence would not be validated. (it is for the lawyers to work out the details, including prevention of any material changes to the company statutes without a 96% vote, especially of such conditions as the 5 % rule) .

In order to persuade voters to adopt this last resolution it will be imperative to present in its support a revised business plan for the development of the Exchange because, if the BVB cannot demonstrate that all this effort is to serve some concrete, useful end, we might as well all shut up shop and go home. This leads naturally to a discussion of the medium horizon, which I will explore in the next article.

Meanwhile, it is important to note that all these proposals reflect an underlying assumption about the principle of a stock market: what is it for, what purpose does it serve? Does it exist solely to serve the immediate interests of its members, (perhaps even also of its clients, the investor or the company which has a listing), or does it exist to serve a fuller purpose, the development of the Romanian market economy, which in fact might also serve the best interests of its members and shareholders in the long term? Or both, and then there is the question of how to reconcile both long and short term interests at the same time. Can it be done?

In the current climate, it seems to me that, what is driving the discussion are the immediate, short term interests of certain members, that is, a desire for cash now, together with a desire to control the continuing immediate and specific interests of certain parties, rather than looking to the medium or wider horizon of the market place as a whole. My response is to put forward The Plan that I have outlined above, which is designed both to meet those immediate demands ("give us the money") and at the same time to correct any potential imbalances which might jeopardise the ability of the BVB to serve the best interests of the market place in the longer term.