American hedge fund Elliott resumed its acquisitions of Romanian Fondul Proprietatea (FP) shares last week, when it bought a large chunk of the fund’s global depository receipts (GDRs) traded on the London Stock Exchange for USD 37 million. Elliott then continued its purchases on the Bucharest Stock Exchange, buying some USD 17 million worth of FP shares from the market.

The acquisitions in the past week have totaled almost 270 million shares, representing over 2.4% of the fund. Elliott thus increased its holding in Fondul Proprietatea to over 20%. Its stake is currently worth some USD 450 million.

The hedge fund sold a large chunk of Fondul Proprietatea GDRs (some 1.4%) just after the fund’s secondary listing in London, at the end of April. Elliott sold the GDRs at prices close to USD 11.45, at that time, and has bought them back in the last few days at USD 10.

Fondul Proprietatea’s shares have also lost some 13% of their value on the Bucharest Stock Exchange in the past six months and are currently trading at around RON 0.8 per share. The current market price is 29% lower compared to the fund’s reported net asset value (NAV) per share, which was RON 1.1342, at the end of September.

The trading discount has increased over the past six months, as the share price went down. Fondul Proprietatea’s share decline was correllated to the 18% drop in oil&gas company OMV Petrom’s shares, as the 19% stake the fund holds in the oil group stands for almost a third of its portfolio.

The Romanian state’s lack of progress in bringing its companies to the capital market has also been a drag on Fondul Proprietatea’s shares, as the fund has significant stakes in many of these companies, such as power producer Hidroelectrica, the Romanian Post, or the Bucharest Airports Company, which it can’t sell as there is no market for them.

Fondul Proprietatea recently sold a 4% stake in gas producer Romgaz, one of its most valuable holdings, to raise money for its ongoing buyback program.

The fund’s manager, American group Franklin Templeton, has brought some 120 local and international analysts and investors to Bucharest this week, for its eighth Analyst & Investor Days event. Some of the largest investment funds in the world, with a total value of over USD 1,500 billion in assets under management, from countries such as United States of America, United Kingdom, Germany, Hungary, Estonia, Denmark, Bulgaria, China, Croatia, Slovenia, and Russia, have sent their representatives to this event.

“We are delighted to see such high interest from foreign institutional investors in Romania compared to five years ago, when we took over the management of Fondul Proprietatea. The presence of such a large number of institutional investors is testament of the fact that Fondul Proprietatea and other companies in the Romanian market present an attractive opportunity for investors,” said Greg Konieczny, Fondul Proprietatea’s manager.

Fondul Proprietatea’s shareholders will also attend the general shareholders’ meeting on Thursday, October 29, in which they will have to decide if they will extend Frankin Templeton’s fund management mandate for two years, from April 1, 2016 to April 1, 2018.

Franklin Templeton asks Fondul Proprietatea’s managers to extend its mandate and give it more powers

Andrei Chirileasa, andrei@romania-insider.com