The investors that subscribed during Transelectrica's public offering gained 68% in only one week from the listing of the company on the Bucharest Stock Exchange.
This is ten times more than the interest of a bank deposit in one year. The shares of the national power grid company Transelectrica surged 6% yesterday, the third session in a row when Transelectrica stock price increased by 6%. An investor putting his or her money in a bank deposit would have gained 6%, as well, though in one year.
The price of the Transelectrica shares exceeded 28 RON/share yesterday, which many analysts had forecast for the end of the year, closing at 28.3 RON, after peaking at 28.5 RON at the opening.
The investors that bought at close to 23 RON/share in the first day of trading have already gained 23%, and those that subscribed during the public offering at 16.8 RON/share have already seen a 68% yield. The latter had to have funds 6.5 higher than the value of the shares received during the offer available, so that, taking into consideration the amount of cash immobilised in the offering, the yield is of about 10%.
The IPO was oversubscribed about 3.5 times on the small investor segment and over 8 times on the big investor segment.
The market value of the company has gone up by 112 million euros in the past week, reaching 587 million euros at yesterday's close. Brokers say the main cause for this spectacular growth is the small number of shares available for sale on the market. Under the circumstances, investors are willing to pay a premium to consolidate their stakes.
"The high oversubscription rate left a lot of money on the market, leading to the placement of large buy orders. The investors that subscribed during the offering are willing to pay higher prices to consolidate their positions, considering that the average price of shares in their portfolio is still very good," says Rares Nilas, head of BT Securities.
"Institutional investors that subscribed during the offering are not selling because they don't have too much of a choice in terms of investment opportunities, and most of the small investors have already sold their shares. That is why there are no shares for sale," says Bogdan Trandafir, analyst with BCR Securities. He maintains the current prices are not justified by the financial results of the company. BCR subscribed the entire offering and owns 1.2% in the company.
"The financial analysis does not justify the current price. I expect the price to stabilise in the upcoming period and then I think we will witness adjustments," says Trandafir.
Even now, brokers see Transelectrica shares rising as high as 30 RON/share in the short term; an adjustment would follow, as institutional investors could be tempted to cash in on their profits.
Transelectrica floated on the Bucharest Stock Exchange as a result of an initial public offering whereby it put up for sale shares worth 35 million euros.
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