The bitterly contested increase in the basic capital of Slovakia's biggest insurer drew to a close on August 21, as the owners of Slovenská poisťovňa confirmed that the state property fund's (FNM) stake in the company had dipped below that of private shareholders.
The capital increase had caused a storm of controversy around the country because it meant the de facto privatization of SP, one of Slovakia's healthiest financial institutions. Opposition parties launched a series of lawsuits, saying that in not participating in the stock subscription, the FNM had allowed its share to be diluted and thus had violated the law on privatization of strategic companies.
Other opposition politicians warned the privatization party may not be over yet. Brigita Schmögne-rová, vice-chairwoman of the former communist SDĽ party, said that Slovenská sporitelňa, the country's biggest bank and savings institution, might be privatized by a means similar to Slovenská poisťovňa - via a capital increase. "I have information that this might happen by the end of August," she told independent Rádio Twist.
Ľudovít Černák, a deputy from the SDK, Slovakia's biggest opposition party, also got in on the act, warning that Slovak Telecom might meet the same fate very soon. "We have information that it is currently in the state of preparation," he told the weekly economic magazine Profit.
Deputy Premier Sergej Kozlík, speaking on the Kroky ("Steps") discussion program on state-run STV on August 23, parried the allegations but did not wholly refute them. "Our financial institutions are undercapitalized, and are going to be strengthened in the same way SP was," he said. "We are going to use a capital increase, not direct privatization."
The last days
The SP stock subscription took place between August 3 and 21. Only SP shareholders were allowed to take part in the first and the second round between August 3 and August 11. During a press conference on August 19, Karol Melocík, the president of Slovenská poisťovňa and chairman of its Executive Board, refused to reveal the final results of the subscription, but confirmed that numbers published in the Slovak media were on the mark. "They are very close to the real figures," he said.
The numbers published by the SITA press agency for shareholder stakes following the subscription were as follows: 40.4% for the FNM, 25.6% for VSŽ Holding, 10.9% for Vinlan and 7.6% for Telemar. Consequently, SP's biggest three private shareholders now own more (45.1%) of Slovenská poisťovňa than does the FNM. Before the subscription, the FNM owned 50.5%.
The third, public round of subscription did little to change those figures. "Only 18,294 shares, constituting 0.97% of Slovenská poistovna, are left to be subscribed," said Melocík. Even those few pieces were snapped up by the first buyer who arrived at Slovenská poisťovňa on the next day, a source from SP told the state press agency TASR.
The coming battle
The political opposition has decided not to let the matter drop. "We have initiated and helped to launch three lawsuits which were actually filed by small shareholders," said Ivan Mikloš, the SDK's economic expert and the only opposition member of the FNM Supervisory Board.
The first suit was filed on August 3. It charges that the decision of the Extraordinary General Meeting on July 24, which approved the capital stock increase, is invalid. According to the brief, the Strategic Enterprises Act from 1995 and its 1997 amendment mandated that government shares in strategic enterprises, including Slovenská poisťovňa, be administered by respective ministries - in this case the Ministry of Finance. Since it was the government, through the Finance Ministry, which had owned a majority of SP before the stock subscription, decisions regarding SP stock could be made by the FNM alone.
But the FNM's Melocík produced for journalists a notarized agreement from July 22, according to which the Ministry authorized the FNM to represent it at Slovenská poisťovňa. But Mikloš responded that "if [the document] authorized the FNM as an institution, that would mean it tried to bypass the law that requires that ministries administer the shares. Consequently, it would be invalid anyway."
The SDK did not limit itself to one suit. On August 21, as soon as the subscription was officially over, it filed two more complaints. The first suit notes that the decision to convene the EGM was taken at a general meeting on July 15, when no agreement yet existed between the Ministry of Finance and the FNM. For Mikloš, if the July 15 EGM was not legal, then the July 24 EGM which authorized the capital increase was also invalid.
The second part of the lawsuit is also technical. According to the Securities Act, a "mass issue" of shares has to fulfill several legal requirements to be valid. "Those conditions are that the call for subscription be published at least 15 days before the actual subscription begins, and that it include the investor's prospectus," explained Michal Horváth, the Chairman of the Association of Securities Traders (AOCP).
"Since every issue of more than 1 000 shares is defined by the law as a 'mass issue' [375,000 shares were issued in the subscription], it is my opinion that the subscription did not conform with the law," said Horváth, arguing that there had been no prospectus published in this case, and that the call for subscription had been published only 5 days before it began.
Melocík told TASR that, in his opinion, the subscription had not been an issue of new stock, and therefore that it did not have to fulfill the requirements. But a prospectus was hurriedly published while the subscription was underway.
Given the flurry of lawsuits, the representatives of VSŽ Holding were tentative about their next steps as the most important private shareholder. "We consider our representation on the [SP] Supervisory Board inadequate," said Ján Bača, VSŽ Holding's Director for External Relations. He declined to specify the extent to which VSŽ Holding would participate in the executive management of the giant insurer.
