The IPO of "Hidraulica" failed

• The management of the Bucharest Stock Exchange must decide whether it will approve the listing of the company on the regulated market

• Brokers were supposed to receive 1% of the value of the shares subscribed by their customers

"Hidraulica Uzina Mecanică" Plopeni, the only company that wanted to get listed on the Bucharest Stock Exchange this year did not even raise 1,000 Euros from investors following its IPO which ended on Friday. This is the first IPO launched by a company after the IPO launched by "Pomponio" Alba Iulia in the middle of 2008.

Investors only subscribed 38,000 shares of "Hidraulica", representing 0.04% of the 97 million shares which were offered to the public. The value of the subscribed shares is 4,180 lei.

Nicolae Gherguş, the chairman and managing director of "Confident Invest", the brokerage firm that underwrote the IPO, said, for "BURSA", that the fact that the IPO was undersubscribed was also caused by the current economic conditions.

"Part of the explanation for the failure of the IPO lies with the current economic context and the way it affects the Romanian stock market. I considered it was a good moment for the IPO, but apparently I was subjective", Gherguş said, and he added: "The company went through a rather difficult period in 2009 and 2010, just like most Romanian companies due to the crisis, but it was on the mend. The financial results for 2010 were positive, but weak".

Gherguş does not rule out the possibility of the company not getting listed on the BSE at all, since it does not have the 25% free-float, which is one of the requirements. The head of "Confident" says it will have a talk with the management of the BSE and with the managers of "Hidraulica" in order to convince the Bucharest Stock Exchange to accept an exemption from the free-float requirement, for a certain period of time.

The IPO was not promoted through road-shows, but there were "incentives" for brokers that convinced their customers to subscribe stock in the company. Brokers would have received 1% of the amount subscribed by their customers, but apparently that didn"t seem to stimulate them too much either.

"Hidraulica" attempted to raise a minimum of 10.6 million lei by selling 41% of its share capital, money which it needed to cofinance the construction of an electrical power plant. The project was supposed to raise a European grant of more than 1 million Euros.

Last year, the company raised 5,500 lei, for a turnover of 11.2 million lei. The company is controlled by Dănel Dinu, which owns 99.96% of the shares.