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Oct 19, 2007 14:55 EEST
LJUBLJANA (Slovenia), October 19 (SeeNews) – The Ljubljana Stock Exchange, its listings depleted by consolidation and lack of IPOs, urgently needs new companies and tie-ups with other bourses to grab investors’ interest and stay afloat, analysts say.
There has been a trend for LJSE companies to delist recently following consolidation of their ownership while there has been no initial public offerings (IPOs) on the bourse for the last eight years, and analysts say the LJSE’s future is not bright. Slovenia, which joined the European Union in 2004 and the eurozone on January 1, set up the bourse in 1989.
A total of 47 companies have delisted from the LJSE in the last two years for different reasons. Food company Droga Kolinska and publisher Delo were among the most liquid of them.
“The number of delisting companies seems really high. However, in most cases these were smaller companies with a small number of shareholders who didn’t have intentions to change it, at least in the near future,” Simon Mastnak, head of LJSE’s department for development and marketing, told SeeNews. “Turnover with such shares is so extremely low that a question arises about the sense in trading them on the bourse,” Mastnak added.
However, analysts say the ownership consolidation will deter would-be investors in the LJSE.
“It will result in the redirecting of investors to other markets [...] The bourse should look for new issuers of shares,” Matej Tomazin from investment company DZU Alfa Invest told SeeNews.
The moribund state of the stock market contrasts sharply with the dynamism of its neighbours.
“A problem of the Slovenian market is that, in comparison with Bulgaria and Croatia, there are no IPOs. There is no dynamic for companies which are delisting to be substituted by new shares,” said Dag Kralj, executive director of the asset management and brokerage division of KD Holding, part of Slovenian financial group KD Group.
Croatian food supplements and vitamins producer and distributor of consumer goods Atlantic Grupa, will hold an IPO by the end of the month. Croatian state-owned telecoms company T-HT launched its IPO on October 5 and enjoyed a dazzling autumn market debut.
In Bulgaria, road construction company Trace Group Hold, wide-format and offset printing company Billboard, domestically-owned bank Investbank, engineering, construction and energy group Enemona, and Sopharma Trading, a unit of blue-chip drug maker Sopharma, are only some of the companies which have said they plan to conduct IPOs on the bourse in Sofia by the end of the year.
“There are no companies which could be interesting to investors. If this continues, the future of the LJSE is not quite shining,” Kralj said.
“The bigger companies will delist or will see advantages in listing somewhere abroad and, if there is no flow of new companies, there will be no interest for someone to acquire the smaller companies, and the bourse will die,” Kralj added.
The LJSE’s Mastnak agreed: “In all cases, it is of key importance for the successful further development of the capital market in Slovenia that the bourse and its members manage to attract small and medium sized Slovenian and regional companies which have potential and ambition to become the new blue chips of the LJSE in a few years of development,” Mastnak said.
The LJSE expects two companies to be listed by the end of the year, Slovenia’s second largest bank by assets, Nova Kreditna Banka Maribor (NKBM), and the country’s largest insurer Zavarovalnica Triglav. Of them, only the listing of NKBM's shares is planned to be an IPO.
Local IT company Datalab’s CEO, Andrej Mertelj, told SeeNews earlier this year that the company will seek to raise at least 3.0 million euro by the end of 2007 in an IPO to fund further expansion abroad.
But analysts say there are no Slovenian private companies which have grown enough to see an interest in listing on the bourse and they suggest the LJSE tie up with other stock markets.
“The LJSE should open in some way, or tie up with the bourses in the region or with any western bourse,” Andraz Vrh, asset manager with Ilirika brokerage house, told SeeNews.
The LJSE has already become a takeover target for several European stock exchange operators, including Nordic OMX and the bourses in Vienna, Warsaw, Frankfurt and Milan. The association of LJSE shareholders, which controls 83% of the Slovenian bourse, has yet to declare officially whether they will sell their holdings.
“Maybe a scenario for a tie-up of the southeastern bourses is not bad,” Vrh said.
“We have been connected with these markets in history and we are still connected. A lot of our companies invest on these markets. We know each other well, we know the language, the culture. So I think a tie-up in southeastern Europe [...] will not be a mistake. We can all benefit from this,” Vrh added.
In Greece, the Athens Stock Exchange (ASE) believes a regional capital market in southeastern Europe can be built not only through stock exchange operators buying stakes in regional bourses but also via sharing a common trading platform. ASE has already announced interest to become a strategic partner of the LJSE and the stock exchange in Sofia.
KD Holding’s Kralj thinks the ASE's suggestion of a common trading platform is “a wonderful idea”. “I think that the future of any bourse in the region will be very bad in the next 10 years unless there is a tie-up between them,” Kralj said.
However, he is not sure if this idea can come true.
“On one hand, I am an optimist, because I think it is the only way for there to be any future for these bourses. On the other hand, reality shows it will not happen and I do not see any ambitious future. I am an optimist for ever but also a realist at the same time,” Kralj said.
“Nothing shows it will happen but we always hope a miracle will happen,” he added.
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