The National Property Fund (FNM) on June 24 approved without notice the sale of a 15-percent stake in Slovnaft, the country's sole oil refinery, for 384.61 million Sk ($11.5 million) to a management-led group Slovintegra. Analysts say that the murky trade may prompt investors to dump the firm's shares and further damage the already poor image of the country's capital market.
The FNM did not disclose any further details on the sell-off and its officials, as well as Slovnaft representatives, were not available for additional comment. Peter Bisák, the Privatization Minister, though, said he didn't know about the sale when asked to comment three days later in the Parliament. "I don't know anything about it," Bisák said. "I haven't seen the privatization project." Slovintegra, owned by Slovnaft officials and staff, paid 155 Sk ($4.69) per share, compared to $24 per share on the open market. After the sale, Slovintegra became the majority owner of Slovnaft, raising its stake from 39 to 54 percent.
Slovnaft, the most capitalised issue and one of few blue chips on the Bratislava Stock Exchange, closed at 818 crowns one day before the sale. Brokers said the reaction from abroad to the sale was immediate, and that they were already seeing queries from foreign investors who hold Slovnaft shares.
"It seems they will want to get rid of their holdings [in Slovnaft]," Bohuš Betko of ING Barings said. "Why should they keep them when the privatization implied such a low price per share. They would logically expect the market to approach that sell-off level." Traders said that it appeared as though investors are even willing to sell at a loss since sentiment should push prices even lower.
Untransparent market
While traders have to deal with the sale's immediate consequeces, they view the sale as yet another example of the opaque practices that haunt the country's capital market, and say that it could be a catalyst for investors to leave the market which has been falling steadily over the past months. "This kind of deal will have a damaging effect, not only on the company's share, but also on the entire market," Betko said.
Brokers said that in addition to hurting transparency, the sale will probably further choke the already low market liquidity. "This may be the last hit for the stock market," said one Bratislava-based stock broker who preferred to stay annonymous.
"Very few foreign investors, who are the strongest players to move shares here, will trade on a market with such a bad image as [this one has] at the moment," the trader added. "This has nothing to do with free market principles. They act as if there was no capital market here and, in fact, they are killing the market with such deals."
The deal came on the heels of a dismal issue of global depositary receipts (GDR) which was bailed out at the last minute by the European Bank for Reconstruction and Development (EBRD) at a face value of 1,000 crowns per share. The EBRD later agreed to sell its 10.5 percent stake back to the FNM.
After the most recent sale, the FNM retains a meager 3-percent stake in Slovnaft, which was partially-privatised in the first mass voucher privatization scheme completed in 1993.
