The principle of buyers protection

For the ones that work on the domestic capital market, since the beginning, every IPO represents an additional motive for the consolidation of a motionless conviction: the provisions of the CNVM regulations regarding OPV, regards on several formal aspects of the issue and of the issuer activity, important too, beyond any doubt. But under this side are often hidden intentions not at all orthodox of the seller. Or, these intentions, near the fact that are more important than the figures, the reports and the prognosis included in the prospectus, are never checked in what regards the facts which they sustain and not even in the one of carrying them on, respective of their further validation. From this reason, they are able to compromise, in time, these advantageous means of financing of the development and modernization of the economical processes which are OPV. Those fundamental characteristics of OPV - at need we can present others too - we’ve intuited from the first operation of this type, carried on by, of the today’s late, SC “Sanevit” SA Arad. They’ve confirmed in some way or another, with the occasion -for example- of OPV carried on to SC “Flamingo” SA, „Celule Electrice” SA Bailesti, Transelectrica, SC „Macofil” SA Targu-Jiu, SC „Cercon” Campia Turzii and are on their way to be found again in the initial public offering, for listing, by the Investment Fund STK Emergent.

The assimilation of the financial advantage

If these issuers fallowed, as any private economic agent to create and to get fold of a significant financial advantage through the issue price, through the presentation of societies’ perspectives as being more brilliant as any light that came a long time ago only from east, we don’t have to be too surprised. And not either the fact that the market price didn’t reach to be in some cases higher than the issue price practiced by them. What makes us angry is the way in which applies the principle „protection of buyer“ by the financial titles offered through OPV. It is stated clear and firm that because of the potential ignorance of investors and of the issuer potential of leading him into error, there are claimed, for that further to can be offered, so many information about the offer and issuer as necessary for that the decision of subscribing to be taking into account. Not even about the dimension of the issue premium, often of 24 times higher than the nominal value of the stock given to subscription, proposal lacquered in Prospectus with luring texts, isn’t said anything in the regulations dedicated and isn’t made a thing by the notice authority. The same are the things regarding the conceived and presented materials as IPO to be appreciated and wanted even by the brilliant G. Soros, the distributed materials instead of the Prospectus approved by CNVM. Or, article 178 from the Law 297/2004 clearly precise that “any type of publicity that incites to the approval of the offer represents fraud by abusive or deceptive publicity”. So the misappropriate of the funds obtained through OPV from the base activity of the issuer or by investments in titles, through BSE, occupation so dearest by the main shareholder, appears as an innocent inadvertence.

The validation of the folder

I believe that OPV will be able to achieve the fate if:

a) the CNVM experts will check the reality and the validity of dates and reasons from the Prospectus. It isn’t enough the responsibility assumed by the auditor and by the legal representative of the issuer given in this sense. There are issuers that got assets in doubtful conditions, using the shareholders money in favor of some of them. Especially in case of the Investment Funds are lending in their portfolio of some lands or packages of unprofitable stocks, discharged by the stock held by some familiar against some amounts not at all negligible;

b) to accept us the evaluation of the issuer by the DCF method, because it is forced especially when it doesn’t have a history, as the case of  STK Emergent fund. This fact generates an overflowing optimism for the potential subscribers, which can become sure victims, as the investors in FNI, of some bargain maker which claim an issue price of few times higher of the unit net asset value.

c) to the potential investors in the stocks put for sale will be offered only the information comprised in the Prospectus of public offering approved and stamped on every page.  If CNVM accepts to be distributed to the population the advertising materials without being approved before and to be mentioned this on them, than this respectable institution violates the stipulations of the Law No. 297/2004, that forbids this type of actions. In these terms we turn back to the practices before 1869, when Daniel Drew initiated the ERIE “business”.

d) CNVM accepts to behave as SEC, proving no tolerance against anyone some attempt of replacing the Prospectus with other documents that not only that present in commendatory terms the issuer and the issue, but they simply urge for buying. More, these explicitly stimulate to it, twice by the words “Recommendation - Purchasing”. This is how is mentioned in page 35 of the distributed document to STK Emergent, named „The first list of a closed investment fund to BSE”. The content of those 10 chapters is conceived to arouse to the readers a similar urge with the one felt by the addicted person, against the titles of this fund. You forget at once of the dimension of the claimed giant issue premium, of the way in which the price of some stocks got high, very high etc. All you are interested in is to find out the place where the dealers sell these titles for their favorites and to persuade them to give you a few.

e) the destination of the stipulated funds to be obtained by OPV must be not only accepted, but further checked if it was observed. The same would be proceeding with the business plan, with the projects or prognosis regarding the company’s evolution. If it got to let known to the public the eventual inadvertences in these plans, they would regard the proposals of subscription of others OPV with higher attention. The generated problems of OPV are far-reaching, of fund on the capital market, of a much more importance than the discussed registration of a document. Who commits oneself to administrate them? Because they affect the investors in great part than, for example, the non observance of the priority of order type.