Retail investors expected to bring USD 700 mln for Romania's biggest stock listing

Individual investors on the Bucharest Stock Exchange (BVB) could buy around 30% of the initial public offering (IPO) in which Fondul Proprietatea will sell at least 15% of Romania’s biggest power producer – Hidroelectrica, local brokerage firm TradeVille estimates. The transaction, expected to take place in the second half of this year, will be the biggest Romanian listing ever and one of the biggest IPOs in Europe this year.

Fondul Proprietatea expects to get about USD 2.3 billion for 15% of Hidroelectrica but it doesn’t rule out selling its whole stake in the company (20%) if the demand is high enough. This means, that local retail investors are expected to mobilize around USD 700 million to buy Hidroelectrica shares. A true test for the Romanian capital market, which has been struggling for years to become more than a niche alternative for local investors.

“The possibility of owning shares in Romania’s most valuable company might spark the interest of Romanians in the capital market,” says Georgiana Androne, Senior Broker at TradeVille.

According to TradeVille, individual investors show a heightened interest in Hidroelectrica and people who have never invested in stocks before are asking its brokers how they can buy shares in the company. The 24% increase in the number of individual investors in Romania in 2021 and the high interest shown in previous IPOs carried out by local energy companies are among the arguments for a more consistent retail tranche in Hidroelectrica’s IPO.

Traditionally, in developed capital markets, retail investors were allotted around 10% of the shares sold in IPOs, while institutional investors - with higher purchasing power - were reserved the remaining 90%. In recent years, the participation of retail has increased due to the development of trading applications that make investing more accessible for individuals, including in Romania.

In Romania, the retail investors’ interest in the listings of large state-owned energy companies has manifested since 2013-2014. While the tranches allocated to retail investors in the IPOs carried out by Nuclearelectrica (SNN) - 15%, Romgaz (SNG) - 20% and Electrica (EL) - 21% - were generous, there were significant oversubscriptions (SNN - up to 5.6 times; SNG - 17.7 times; EL - more than 8 times).

However, none of these offers were anywhere near the size of the expected Hidroelectrica IPO. The biggest IPO on BVB to date is the one carried out by the electricity distributor Electrica in June 2014, in which the Romanian state raised EUR 444 mln by selling 51% of the company’s shares. Gas producer Romgaz’s IPO, which took place in November 2013, was also close to EUR 400 mln in size. Both were dual listings, taking place on the Bucharest Stock Exchange and London Stock Exchange.