THE BSE IS CONSIDERING REDUCING ITS SHARE CAPITAL Hitting several targets in one blow

The BSE seems intent on becoming a textbook example of everything a company listed on the stock exchange should not do - first of all, lying about the resignation of one of the members of its board, and now, trying to hide the fact some of its shareholders intend to lower its share capital in order to take their money home.

On both occasions, "BURSA" had the task of reestablishing the truth or, in the latter case, of making the information public, which, even though it what the press is supposed to do in the first place, shouldn"t be needed to do when it comes to a stock exchange.

Following the article that "BURSA" published yesterday, in which we revealed the BSE"s intention to reduce its share capital by about 9 million Euros (its current share capital is 18 million), the BSE has begun its trading session by suspending its stock for 30 minutes, for a reason which was announced in a Current Report, which we reproduce hereinafter.

The intention of the shareholders of the BSE to appropriate the money of the company is not a matter of black and white; on one hand, brokerage firms aren"t doing so hot, and they could use the money to survive, (besides, by lowering its share capital, the BSE would be forced to do something to grow, because its "staff" would no longer be riding the gravy train thanks to the interest accumulating on the accounts of the BSE); on the other hand though, the moment the "staff" actually decided to do something, they could find themselves unable to do so precisely due to the BSE having become undercapitalized.

However, those who support the share capital reduction and those who are against it seem to agree on one point: the money of the BSE lies inactive and should be put to use.

Those who want to put the money in their own pockets look like they"re not brimming with confidence that anyone will be able to find a way to help the BSE grow (although it could simply be the fact that they are desperate about their own financial situation).

The others seem to be the fanatical supporters of the Exchange (I have to confess I am also one of those who adopt such an irrational stance, which can be explained by the fact that I am a journalist with no financial involvement in the matter).

In my opinion, the share capital reduction is regulated by paragraph b) of article 207, Chapter II of the Law of Companies, which is reproduced below, which also gives me the opportunity to make a rather bitter comment on the situation.

During the controversy around the demutualization of the Bucharest Stock Exchange, in the summer of 2005, I fully supported the idea that brokers should receive stock in the BSE at no cost, because that institution had been created and developed through their efforts.

On this matter, nothing has changed, it"s just that the notion of "a quota of the paid-in capital" provided in the law, becomes very arguable when brokers decide to appropriate their share of "paid-in capital" and put in their pockets, when they got it for free in the first place.

The operation seems legal in itself.

But it also seems immoral.

Because even though the BSE is privately owned, it remains a public institution because of its role.

And the actions of the owners, which put the future of the exchange at risk just so they can save themselves now, are immoral.

Yesterday"s rumors claimed that the idea to reduce the share capital of the exchange comes from the same Daniel Daniel Ţepeş, member on the Board of the Exchange who gave us such a hard time because we discloses his resignation which he claimed never happened, and which was later proven true.

In order to prevent him from again behaving like he did last time, when he issued a statement in the press accusing us of publishing lies (talk about nerve!), it needs to be said that the rumors weren"t started by us and we are not presenting them as news; they are simply rumors and we have a duty not to ignore them.

According to the rumors, Ţepeş has requested a 13 million Euro reduction of the share capital of the BSE, the elimination of the 5% holding limit per shareholder and the modification of the quorum needed for making decisions at the General Shareholder Meeting of the BSE.

Could it be true?

We don"t know, because yesterday, when speaking on the phone with Daniel Ţepeş he said he had no time to talk.

But, if it is true, it seems that the goal of the request is to allow him to make his holdings in the BSE official, (it is suspected his stake exceeds the allowed 5%), that he wants to actually benefit from his takeover efforts and to bring the shares of the BSE to a certain parity with those of the "Sibex" Exchange of Sibiu, for a potential merger, which would consolidate his position as a major shareholder of Romania"s main stock exchange, also making his stake very valuable to potential foreign investors.

Kind of like the Valiant Tailor in the fairy tales who killed seven flies in one blow, this would be hitting several targets with one strike.