Initial public offerings (IPOs) were what the Bulgarian Stock Exchange (BSE) was all about in 2007. Company after company used IPOs as a tool to get more funds and earn profits. As usual with every new fashion, the BSE had its record-setter. It was the construction company Trace Group, whose IPO was oversubscribed by more than 1480 times. This record threw a suspicious light on the market and authorities took steps to changing legislation.
In Traces case, bidders were not required to make a full or partial upfront payment. This meant that many investors placed bids well in excess of their available income to ensure that they would get shares. Consequently, to buy a single share in Trace with a nominal value of one lev and an issue price of 110.50 leva, it would have been necessary to make a bid of 164 000 leva. Because of Traces record oversubscribing, authorities said that bids in subsequent IPOs must not exceed the bidders bank deposit, equity or mutual fund holdings.
In general the year for the BSE had ups and downs. The last three months of 2007 saw all the downs, marking a difficult period for the relatively small market. November saw 20 per cent wiped off the face value of shares listed on the BSE, the largest sell-off in the history of the exchange.
