Fondul Proprietatea argues for dual listing of Hidroelectrica’s shares

The general shareholders meeting of Hidroelectrica approved the initiation of the listing of the company’s shares on the Bucharest Stock Exchange (BVB) following a public offering of the company’s shares held by the Fund, Fondul Proprietatea (FP) announced in a note to investors on March 31.

This came as no surprise after the Government had announced earlier this year that it agrees in principle with the IPO and with the listing of Hidroelectrica’s shares.

However, in a separate press release, FP argues for dual listing of Hidroelectrica - on the BVB as the main market and on a suitable international market, such as the London Stock Exchange.

“In order to ensure the success of the listing, [...] our view, as the selling shareholder, is that a dual listing of Hidroelectrica should be pursued,” Fondul Proiprietatea states, according to Bursa.ro.

The note to investors (which is the only official document available at this moment) only mentions the listing on BVB.

The extensive argumentation developed by FP in its press release includes a list of ten benefits provided by dual listing. FP says that it trusts that the Ministry of Energy as the majority shareholder of Hidroelectrica will give further consideration to the Fund’s recommendation for a dual listing of Hidroelectrica.

“We believe that a decision regarding a secondary listing venue should be taken in a subsequent shareholder meeting of Hidroelectrica, based on the recommendation of the consortium of investment banks and advisors,” the press release reads.

The ten reasons provided by FP for the dual listing may or may not hold water - but in principle, there are no reasons for the Government to deny the seller’s right to choose a secondary market. But it is clear that what may be “a successful listing/IPO” for FP may later turn into losses for investors (pension funds to a large extent, supposedly) if the price sees a sharp post-listing negative correction - as it happened in the so-called “successful listing operations” judged as such by the listing price.

In brief, FP needs a dual listing in order to cash quickly its shares, and (legitimately) at a high price. For a 15% stake, it estimates a value of the deal of around USD 2.3 bln or RON 10.4 bln. It’s quite a substantial figure resulting in a company valuation of USD 15 bln - compared to USD 10 bln estimated by FP officials earlier this year. It’s quite a substantial figure also for the Romanian Stock Exchange, FP argues.

FP also said in its press release that it expects to complete the listing by the end of the year.