Universal Registration Document

For a listed company, market dynamics can bring one or more public offerings or other market operations each year. In this case as well, it is a good idea to have a document approved and published by the Financial Supervisory Authority. If you are wondering what it does, the Universal Registration Document represents the common core of a prospectus—the section that presents the issuer and its business activities to investors.

It is useful because it simplifies the administrative process for any offering carried out within the 12 months following its publication. An authorized intermediary can prepare it, and the approval process is identical to that of an offering prospectus, meaning that approximately four to six months from the start of the work it will be ready. Once it receives approval from the competent authority for two consecutive financial years, subsequent universal registration documents may be filed with the competent authority and then published without prior approval.

If, at a later stage, you do not file a universal registration document for a financial year, the benefit of filing without prior approval is lost

Listări tehnice

N-au trecut nici 10 ani de atunci dar puțină lume își amintește că una dintre marile povești de succes antreprenorial ale pieței AeRO-SMT (grupul Bittnet) a început cu o listare tehnică. Altfel spus, nu a avut loc o ofertă ci doar un proces administrativ. Partea bună – pe parcursul său, noi te putem asista. La final (de obicei durează 3-4 luni) compania devine un emitent listat al uneia dintre piețele operate de BVB. Din acel moment acțiunile sau obligațiunile sale, după caz, vor putea fi tranzacționate la bursă de cei care le dețin.

De ce? Fiindcă poți atrage atenția investitorilor, dovedești că ești dedicat ideii de bursă și obții o evaluare a acțiunilor companiei tale direct din piață. Poți atrage ulterior și capital printr-o ofertă publică de de vânzare acțiuni majorare de capital sau o ofertă publică de vânzare de obligațiuni așa cum au reușit deja și alte companii, una dintre ele ajungând deja listată pe piața principală.

Bonus Share Issuance

Your company grows in one year as much as others do in ten. And two dilemmas arise. The first: will you eventually have to guard the golden apples? And the second—do you want to retain your investors, but need cash to support further growth?

We cannot answer the first without catching a lame rabbit, and since we love animals, that will not happen. But for the second, we follow the American example and introduce the terms stock dividends—dividends paid in shares—and bonus shares. The differences between the two are minor and are mainly of fiscal relevance to investors.

What matters to you is that this approach allows investors to decide their own dividend policy by selling the desired number of newly received shares, without depriving the company of its corresponding share of profit. In practice, you can self-finance your growth—something from which investors also benefit.

In Romania, this concept is gaining traction especially on the AeRO-SMT market, but it has been successfully implemented on the main market by Banca Transilvania since the early 2000s. From a legal perspective, the operation represents a capital increase by incorporating part of retained earnings and issuing shares free of charge; locally, it is known as a “bonus share issuance.” We can assist you with all the required formalities, which typically take 2–3 months and include interaction with the Financial Supervisory Authority (ASF).

SOP (Stock Options Plan)

How do you align employees’ perspectives with those of shareholders? Well—short of running an indoctrination program backed by a government agency with access to specialized hypnosis tools—you could turn employees into shareholders. How do you do that? Through a Stock Options Plan.

Since the Romanian acronym might sound like something a doctor should look at, we will use the international term—Stock Options Plan (SOP). This can help young companies not only retain shareholders, but also resolve the dilemma between recruiting top talent and executing an investment plan. And yes—there are also tax advantages to compensating employees through stock options.

In simple terms, an SOP means enrolling employees, via their employment contracts, in a bonus program based on clearly defined and objective criteria established from the outset. Periodically, those who meet the criteria have the right—but not the obligation—to purchase shares at a very favorable price, or to receive them free of charge. This is followed by a period during which employees can exercise this right for each respective year, after which, as a rule, the newly acquired shares may only be sold once a lock-up period has expired. This means that at least one year passes from the launch of an SOP until shares are delivered to employees, and the first sales typically occur around one to one and a half years thereafter.

Yes, you will need to issue new shares or repurchase existing shares from the market. The first option is usually the most straightforward if you represent a company where shareholders holding at least 85% of the voting rights participate in General Shareholders’ Meetings. They may suspend pre-emptive rights and use a capital increase with shares in exchange for receivables generated by the exercise of SOP options. For other companies, a secondary offering is typically used to raise the funds required for a buyback program, and any shares left unsubscribed may then be offered in exchange for receivables through a private placement. Of course, if your company has excess cash, you can take advantage of the tax benefits of an SOP and simply repurchase your own shares from the market, in compliance with applicable share buyback regulations.

Post-Public Offering Stabilization Programs

You have successfully completed a public offering. Congratulations. We do not want to spoil the celebration… but it is possible that some of the shares were subscribed by speculators with a very short investment horizon, while the number of investors remaining interested in the market may be small—at least in the short term. You are still happy that the offering was a success, of course—but what does this actually mean?

It may mean that you face artificial selling pressure, which can negatively impact the market price during the first weeks after trading begins. What can you do? You may include in the offering prospectus the possibility for the offering intermediary (acting as Stabilization Manager) to purchase part of the shares sold, for a maximum of 30 calendar days from the date of admission to trading (the so-called Stabilization Period). Why? Because such a program discourages pre-emptive selling by certain investors and can be administered at the broker’s discretion, within the limits of the mandate set out in the offering prospectus and the intermediation agreement.

If the pressure is not merely temporary, the program will not achieve the desired effect, and the company must consider whether it makes sense to spend part of the funds raised through the public offering. As a rule, these programs are prepared simultaneously with the public offering.

Takeover Offers

You may wish to acquire a significant percentage of shares. Or your company may wish to do so. Or perhaps you want to reward shareholders and need to convert bonds into shares in order to implement an SOP.

Whatever the situation, takeover offers require collaboration with an intermediary to prepare the offer document.

Is it ready? It still needs to be approved by the Financial Supervisory Authority—plus a few additional formalities. Yes, we know, Kafka is still relevant.

Once approved, the actual subscription process begins. Have all the conditions set out in the offer document been met? Perfect—then the transactions committed through subscriptions can be executed. This means that the overall timeline should be budgeted at a minimum of 4–6 months.

Share Buyback Programs

Sometimes, in order to reward shareholders, to convert convertible bonds into shares, or to settle obligations arising from the implementation of an SOP, companies choose to repurchase their own shares. A buyback program is a simpler alternative to a takeover offer, but it has a more limited scope of application.

In practice, following a decision of the General Shareholders’ Meeting, the parameters of the operation are established, the necessary funds are allocated, and typically an intermediary is selected. The company then opens an account with that intermediary and executes the operation in accordance with the parameters approved by the General Meeting. Since market conditions may not always be favorable, the completion of the acquisitions may take more than one year, while the preparatory steps alone can take 2–3 months.

Share Splits

Your company is enjoying resounding success. Practically speaking, you are a mix between Tesla and Amazon—without a confusing Twitter account and without going bald. You might think everything is a beautiful dream, but wait. The market price of your shares becomes very high compared to the average purchasing power of an investor. That would suggest it is time for a secondary offering, right? But what if you already have sufficient capital and such an offering would only represent an additional cost? Apple faced this situation in 2020, and you can follow their example: they divided their share capital into five times as many shares, reducing the nominal value of a share fivefold and, implicitly, granting investors four new shares free of charge for each share held.

You may think this sounds paradoxical, but in such cases the price of a share does not necessarily fall exactly fivefold. Instead, a split premium may appear—because demand for the company’s shares increases as more investors are able to buy them. The procedure is relatively simple, at least compared to a public offering, but it does require convening a General Shareholders’ Meeting to amend the company’s articles of association, along with a series of formalities with market institutions. Yes, the entire process can take two or three months.

And do not forget: in Romania, the nominal value of a share cannot be lower than 10 bani, so share splits cannot be carried out indefinitely.

Consolidări

Compania ta nu are un succes răsunător. Din contră, de mai multă vreme compania ta a hotărât că nu banii contează în viață și că suntem cu toții prea materialiști pentru propriul nostru bine. Prețul acțiunilor tale scade de ceva vreme și se apropie de prețul de piață de un ban. Sau un cent. Investitorii le ocolesc așa cum îți ocolești vecina care te întreabă daca îi poți cumpăra un kilogram de cartofi dacă ai drum la piață fiindcă vor să evite situațiile în care o variație minusculă în termeni absoluți se trasnformă într-o variație procentuală mare.

În aceste situații vine momentul de a apela la consolidarea valorii nominale – opusul splitării.

Ce se întâmplă, e o creștere a valorii nominale a acțiunilor, concomitent cu reducerea numărului de acțiuni emise – deci investitorii vor avea mai puține acțiuni dar cu o valoare mai mare. Iar unii investitori pot rămâne fără o parte – sau chiar toate – acțiunile deținute anterior consolidării. Ceea ce nu îi va face să-ți trimită felicitări de ziua ta, așa că, pentru derularea operațiunii, este obligatoriu ca documentele aferente să conțină un preț pentru compensarea fracțiilor rezultate în urma sa. Și un ultim cuvânt – în funcție de perspectivele economice ale firmei emitente a acțiunilor poate exista un efect pozitiv și după consolidare dar situația nu este la fel de clară.

Share Consolidations

Your company is not enjoying resounding success. On the contrary, for some time now it seems your company has decided that money does not really matter in life and that we are all far too materialistic for our own good. The price of your shares has been declining for a while and is approaching a market price of one ban. Or one cent. Investors avoid them the way you avoid your neighbor who asks you to buy her a kilogram of potatoes if you happen to be going to the market—because they want to avoid situations where a tiny absolute change turns into a large percentage variation.

In such cases, the time comes to resort to a consolidation of the nominal value—the opposite of a share split.

What happens is an increase in the nominal value of the shares, accompanied by a reduction in the number of shares issued. As a result, investors will hold fewer shares, but each with a higher value. Some investors may end up losing part—or even all—of the shares they held prior to the consolidation. This is unlikely to make them send you birthday greetings, which is why, in order to carry out the operation, the related documentation must include a price for compensating the fractions resulting from the consolidation.

One final note: depending on the economic outlook of the issuing company, there may be a positive effect even after consolidation—but the situation is far from guaranteed.

Delisting (Withdrawal from Trading)

Your company needs time to undergo strategic reorganization. There is no shame in that—we all go through an identity crisis at some point, even DELL. The reality is that, in some cases, this process can be carried out more easily outside the stock exchange. In such situations, the company’s management must meet a series of administrative requirements and ensure that minority shareholders are given the opportunity to exit the company—under certain conditions, this withdrawal may even be mandatory.

As we aim to contribute as much as possible to the development of the Romanian capital market, this type of operation is not a priority for Investimental. We have addressed this topic because it would not have been fair to pretend it does not exist, but we firmly believe that our stock exchange needs far more new companies than “creative destruction.” For this reason, we choose to focus our efforts there.

Thank you for your understanding.