The stock of Impact Developer & Contractor (IMP), the only real estate developer listed on the first tier of the Bucharest Stock Exchange, has lost about 50% since the beginning of the year, the sharpest fall on the BSE.
Impact shares were listed at 0.5 RON at the end of 2007, but their price has gone down to around 0.25 RON over the last few days.
The index of the top ten companies on the Stock Exchange, BET, which also includes Impact's shares, lost 25% during the same period.
Dan Ioan Popp, Impact chairman, has lost about 80 million euros in the wake of the decline over the last eight months, which means his 28% interest is now appraised at 38.5 million euros, compared with 120 million euros in July.
"The main culprits for the drop in shares are speculative foreign funds, as well as local investors. Large foreign funds that have long-term commitments to the company don't care too much about such momentary declines," Dan Ioan Popp told ZF.
Impact's value has declined by around 65% since mid July; a decline that started with the onset of the subprime credit crunch on the US market, which caused significant declines on the capital markets.
Analysts say that the stronger decrease of Impact's shares compared with the rest of the market follows the trend of the shares of real estate companies worldwide, which were the most affected by the financial crisis, along with financial sector companies. Austrian fund Immoeast, the most powerful buyer on the Romanian real estate market has lost about 40% of its market value over the past eight months, and the price of its shares has fallen from 10 to 6 euros.
Still, analysts add that the decline of Impact shares was due in part to the operating results the company reported last year that fell below expectations, despite the high profit derived from the reassessment of property.
"The conditions were generally unfavourable for real estate stock, but I believe the fact that the company did not confirm with its core business and did not meet its targets in 2007 also contributed to this decline," says Carmen Arsene, CA IB Securities analyst.
The interest rate growth and the exchange rate trends are factors that foreign investors see as negative, especially for companies in real estate, such as Impact, other analysts confirm.
The decline of Impact shares has hit foreign investment funds that invested in the company last autumn such as Lehman Brothers and Julius Baer, which lost more than 60% of the amount invested at the time.
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