Fondul Proprietatea’s shares gain 45% on reference price after dividend as Romanian Govt. challenges Franklin Templeton as manager
The shares of Romanian investment fund Fondul Proprietatea (BVB: FP) gained 45.7% compared to their theoretical reference price calculated on the ex-dividend day (September 7). The evolution may have also been impacted by the Government’s request to organize a new selection procedure for a fund manager as the authorities plan to get Fondul Proprietatea involved in their economic development plans.
Thursday, September 7, 2023, was the Ex-Dividend date at Fondul Proprietatea, namely the first day when the fund’s shares didn’t carry the special dividend worth RON 1.7225 per share that the fund decided to distribute after selling its 20% stake in power producer Hidroelectrica (H2O).
Theoretically, the share price should have dropped by RON 1.7225, from RON 1.9840 (the closing level on September 6) to RON 0.2615. However, the shares ended the trading session at RON 0.381, 45.7% above the reference level. This translates into a return of about 6% for the investors who bought shares on the day before.
Still, this gain is only on paper, because it’s roughly equal to the dividend tax owed to the state for the special dividend (8% or RON 0.1378 per share).
Fondul Proprietatea’s shareholders approved in August the distribution of RON 9.28 bln (EUR 1.88 bln) worth of dividends from the Hidroelectrica share sale. About 14% of this amount – RON 1.33 bln – will go to the state budget as tax on dividends (RON 742 mln) or dividends cashed in by the Finance Ministry for its 6% stake in Fondul Proprietatea.
Finance Ministry calls for changing the fund manager and new objectives
Another important event that may have impacted the FP shares on September 7 was the Finance Ministry’s request to organize a selection process for a new fund manager.
Franklin Templeton, which has been Fondul Proprietatea’s manager since September 2010, was looking to have its mandate extended by another four years (from April 2024 until March 2028) by the fund’s shareholders in the General Shareholders’ Meeting on September 25.
However, the Finance Ministry proposed that Franklin Templeton’s mandate should be extended by only one year (until March 2025). The ministry also proposes to “organize a transparent and competitive selection procedure for the appointment of a new sole director based on based on investment expertise and experience in industrial companies in Romania”.
“The rationale behind our request is to put Fondul Proprietatea back on a medium and long-term investment track, aligned with Romania's economic development priorities. This realignment can be achieved by establishing a new mandate for the Fund Manager and by modifying the performance evaluation and remuneration indicators,” reads the request signed by finance minister Marcel Bolos.
“Fondul Proprietatea can respond to a real need for financial market development - the (partial) coverage of the local contribution to private equity funds co-financed by the PNRR. In this area, Romania aims to create up to 20 Funds, with European funding of EUR 400 million and a corresponding need for local co-financing of at least EUR 200 million. In perspective, the development of this ecosystem of Private Equity Funds will provide the Romanian industry with a broad, competitive, sophisticated and deep palette of investors,” the finance minister argued.