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Investors say that global stock markets in the summer are like the beach: all the investors are thinking about are holidays, the trading is slow, the volumes go down, the primary market is dormant… But not in Warsaw!
The WSE was very busy over the last few weeks. Warsaw became the market of choice for IPOs of the Austrian real property developer Immoeast (IPO value USD 3.775 billion) and of the Orco Property Group (USD 231 million). On 4 June 2007 the Warsaw-based real property developer JW Construction had its debut on the exchange (USD 276 million raised in the issue); the long-awaited issue of another Polish real property developer LC Corp (USD 378 million) sold out almost instantly leaving many investors hungry for more (there was a 98% reduction of the allocation of shares to individual investors).
“This is best proof that the WSE is an attractive market for large offers (in Polish and European terms) at US$ 300-500 million,” says WSE President Ludwik Sobolewski. He is particularly glad to note that the WSE is becoming a regional IPO centre for the large, fashionable and promising real property sector.
The WSE has over the past years been one of Europe’s most active primary markets: there were 38 IPOs in 2006 and already 32 IPOs in H1 2007, reflecting the performance of a top European leader.
“The excellent performance of the past months is only the beginning,” says Ludwik Sobolewski. In his opinion, the WSE’s efforts to build a regional CEE exchange centre are starting to bear fruit.
Naturally, PR and efforts to attract issuers are not enough. The issuers have to be convinced that WSE IPOs are an easy and inexpensive way to raise capital and to improve the liquidity of shares. “We are in for a snowball effect: successful IPOs of foreign companies will drive more interest in WSE IPOs and attract large investors, from neighbouring countries as well,” says Andrzej Olszewski, ING Securities Managing Director. He added that his company is in advanced negotiations with potential WSE issuers, including Ukrainian companies.
Several Ukrainian companies are planning a WSE IPO, including XXI Century Investments. The Ukrainian developer listed on AIM plans a WSE IPO to improve the liquidity of its shares. Dozens of meetings, conferences and presentations arranged by the WSE for the Ukrainian business community pave the way for other Ukrainian companies to follow in the footsteps of Astarta and XXI Century. WSE President Ludwik Sobolewski confirms that foreign issuers are very interested in the WSE. In the course of this year we shall see at least 60 new listings, in this some 6-8 foreign ones.
What brings issuers to Warsaw? Primarily, the potential of the market. Large issues in the pipeline are great news to pension funds and, mainly, investment funds which get several billion zlotys of new funds each month thanks to a fundamental change in the Poles’ propensity to save. Domestic individual investors are traditionally a strong group on the WSE (they ensure highly liquid trading) as are foreign investors. “They are exactly the same group who invest in London and Frankfurt where they buy shares of companies based in the region. Both foreign and Polish investors welcome each new issue on the WSE. If you can get more and pay less, why pay more?” says Andrzej Olszewski.
“The WSE is also attractive thanks to higher valuations,” adds Andrzej Olszewski. The WSE indices gain several dozen percentage points year on year since Poland’s EU accession. According to analysts, the growth is sustainable and grounded in companies’ fundamentals and the excellent outlook for the Polish economy additionally driven by the Euro 2012 expectations. “We are here because this is the future,” said Jose Manuel Corrales, CEO of the Spanish company ACE at its recent IPO on the WSE.
IPOs in Warsaw are relatively inexpensive: the cost of a large issue is usually less than 4-5%. It is also a good investment in the company’s image. “Who had previously heard of Astarta? Today it is a buzz word!” wrote Jaros?aw Kinach, XXI Century Management Board Member, in an Expert Ukraine article. “Astarta’s IPO would have gone unnoticed in London or New York. An IPO of a foreign company on the WSE is still a huge media event,” adds Andrzej Olszewski. In his opinion, culture and language are another important dimension: Who understands (also literally, in terms of language and communication) a Ukrainian issuer better than a stock exchange in a country where each active investor speaks (or at least understands) Russian?
The WSE becomes more attractive as the LSE has decided to introduce stricter admission criteria while AIM, which had less strict reporting requirements, is making them more demanding.
The WSE will soon have another asset: the NewConnect market to be launched in a few weeks’ time (August 30). The market offers an opportunity for young and innovative companies seeking investors willing to accept a greater level of risk in expectation of a higher potential return. The first companies will list on NewConnect in August. “We hope that the issuers will include Ukrainian high-tech companies. Both Polish and Ukrainian companies face the same challenges: they have lots of ideas for high-tech projects but the banking sector is unwilling to finance them. What better solution than to launch a simple inexpensive market with a preference for high-tech companies” adds Sobolewski.
Foreign IPOs in 2007:
Company |
Country |
IPO date |
IPO value (USD)* |
Orco |
Luxembourg |
21.06.2007 |
230,552,650.18 |
ACE |
Spain |
1.06.2007 |
90,145,689.44 |
Immoeast |
Austria |
25.05.2007 |
3,774,717,899.21 |
Warimpex |
Austria |
29.01.2007 |
140,888,157.89 |
* Exchange rates used – PLN/USD Average Exchange rate published by the National Bank of Poland on the debut date
Largest IPOs in 2007:
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