THE ELECTRICA IPO Dumitraşcu: "Many investors make speculative acquisitions and then they sell in the first month after the IPO"

The state has targeted first and foremost foreign institutional investors for the IPOs of energy companies on the Bucharest Stock Exchange, while statistics show that Romania's population has over 30 billion Euros in savings.

When asked by BURSA to comment on the reasons behind why this happened, Gabriel Dumitraşcu, the head of privatizations in the Department for Energy gave us the following answer: "In the IPO of Electrica, we are making available for the first time a guaranteed number of shares for small investors and with a discount in the first days, precisely to encourage the savings to turn to the stock market, but when an allocation gets made, one looks at all the factors. According to the previously used practices which resulted in a success, in the Electrica IPO we prefer to initially allocate a bigger tranche to foreign investors who are, for the most part, long term investors. It's also our previous experience that has taught us that most of the retail investors make speculative acquisitions and they sell their shares in the first month after the listing. We need to preserve a an optimal ratio between the types of investors to maintain an optimal ratio between demand and supply, in order to have a better performance of the price of the shares of Electrica on the secondary market as well".

He gave us the example of other countries in the region, which he says had several attempts at privatization on the stock exchange with tranches of 40-50% allocated to small investors. "Most of the small investors subsequently sold their shares which they had only bought speculatively and their price collapsed on the secondary market", the head of the privatizations for energy said. He added that the strategic interest of the Romanian state, which will remain a major shareholder in Electrica SA, with 49% of the share capital, is for the shareholder structure after the IPO to be balanced, and for the price of the shares to rise, rather than plummet.

The information discussed in the media concerning the price at which the shares of Electrica would be sold (around 10 lei/share) and the tranches allocated to small investors (approximately 10%) is unfounded, Gabriel Dumitraşcu told us yesterday. He told that those elements would only be discussed next week.