The recent downturn at the Bulgarian Stock Exchange (BSE) has soured the ambitions of local companies to stage primary and secondary public offerings, BSE data since the turn of the year showed.
Although no company has officially backtracked on its plans to go public, many are lingering with the launch of their offers, BSE spokesman Pantelei Karasimeonov told The Sofia Echo on Febuary 29.
Of 60 companies to have notified the bourse of plans to make initial public offerings (IPO) by December 2007, only one – Sparky, the Rousse-based trucklift and welded constructions maker – did so in the first two months of 2008. Mekom Silistra, a meat processor, became the first company to request an extended IPO period over flagging investor interest.
Experts commented that companies have shelved IPO plans waiting for better market conditions. Downbeat sentiment on the bourse, for example, crippled the secondary public offering of Sparky. Although the company put 10 per cent of its shares for sale, investors put in offers for only eight per cent.
Nadya Nedelcheva, portfolio manager at Karoll Capital Management, said the issue would have been fully subscribed if the offering took place at a better time, such as the first nine months of last year.
However, Kliment Rudinski at Bulbrokers brokerage house, argued that the early-year lull would soon give in to an IPO bonanza “because the main winners from the current downswing should be the new IPOs”.
“The sobering downward correction in November, December and January left many market players with a lot of cash and mistrust toward 'the old' public companies,” Rudinski told The Sofia Echo. “Given the upbeat expectations about the development of Bulgarian economy, one can presume that the newly-issued stock should enjoy the highest interest.”
“Most companies, however, probably postpone their IPOs until prices on the local bourses head 'north' again. The management of these companies are very well aware that investors will be much more cautious in their investment choices and would mostly invest in companies with good growth prospects and attractive share prices.”
The current situation in Bulgaria reflects a trend witnessed worldwide. Because of the downspin on international capital markets, 64 IPOs worth $21.4 billion have either been postponed or cancelled since the start of the year, Financial Times reported.
During the same time last year, the value of postponed IPOs was at a mere $1.5 billion.
“Volatile markets dampens interest toward IPOs. Investors are cautious about bourse newcomers and if they do invest they do so at very low prices,” Merrill Lynch analysts were quoted by FT as saying.
Global stock exchanges witnessed 100 IPOs worth $13.3 billion in the first two months of the year. About 84.7 per cent of them were carried out on emerging markets.
