The decision, which went unnoticed by the general public, has the potential to generate long-term profits for millions of Romanians, who have long forgotten about owning SIF shares. Many of those who received coupons during the mass privatization programs of the early nineties still own SIF shares. Some hold residual stakes in each SIF, others own 1,000 shares each. In all, there are millions of shareholders, who own 30% to 50% in the total SIF shares, that is EUR200 to EUR300 million, calculated at the current prices on the stock market.
A virtual fortune that lies forgotten in the drawers where millions of Romanians keep their papers. Because the shares in question are non-existent on the stock exchange. There are no buyers for them and the potential sellers forgot they even had them.
The stake cap raise could change all that. Investors will now be able to buy up to 5% in SIFs, compared with the previous 1%. This means they will be able to buy more shares and when they will have no one left to buy from, they will start chasing the forgotten shares.
How will they do that? By driving prices up.
Back in 2006-2007, after the stake cap was increased from 0.1% to 1%, SIF prices went through the roof. Back then, hundreds of thousands of Romanians remembered they owned SIF shares and came to the stock market to sell them to buy TV sets, refrigerators or stoves. Because a SIF stake, as small as it was, was worth several hundred or several thousand lei in case of 1,000-share stakes.
Why would anyone want to buy? There are many foreign but also local investment funds that would like to invest lots of money on the stock market, but have hardly anything to buy. Some of them have been stuck with 1% SIF stakes for years. They cannot sell because they would lose money, but cannot buy, either, because the 1% cap won’t let them. The limit does not allow them to have a say in the running of those companies to make them more efficient or to demand higher dividends and are at the mercy of the managers.
The increase of the ceiling will increase the influence of these investors in the management of the SIFs. In addition, the SIFs have very valuable assets in their portfolios, officially valued at EUR1.45 billion, double the current capitalization, which would motivate a number of investors to buy.
Therefore, theoretically, those who stand to gain are both the investors who will be able to buy and the small shareholders who will be able to sell for more money. Experts on the market hope this decision and the listings the government promised for next year will be the beginning of a new development stage for the capital market in Romania. What is the ultimate goal here? For Romania to attract capital from foreign investors, and Romanian companies to find an alternative to bank loans.
(English version by Loredana Fratila-Cristescu)