An education in privatization?
The unique method of attracting new small-time investors to PKO BP's huge share issue has paid off, as thousands braved near-freezing conditions to catch a ride on the privatization bandwagon.
The bank was flooded with requests to set-up special privatization deposit accounts as long queues formed outside PKO BP branches across the country. Within six hours of opening its doors for business 65,000 people had signed up for the relevant accounts that will allow them to purchase a maximum of zł.20,000 of the zł.1.1 billion block of shares earmarked for Poland's ordinary investors.
The sale is Europe's largest initial public offering of the year and Poland's biggest since Telekomunikacja Polska's in 1998. The government hopes the partial privatization will raise zł.6 billion for its budget coffers.
The State Treasury's retail investor package is seen by market watchers as an excellent tool to encourage Poles to embrace privatization. CA IB Securities' equity analyst for banks Jakub Korczak says: "The way this privatization has been managed is educational for Poland's retail investors. Getting more people interested in the stock exchange is a good thing. If they earn money on one stock then they are more willing to participate in more privatizations.
"The thing that was different this time was the construction of the first part of the retail transfer into privatization deposits. This kind of angle was not used before and got people to put money into the bank."
Korczak says previous big privatizations have been well received. "In terms of banking stocks, Bank Śląnski created a huge public interest in shares when it was privatized in 1993. It was the one where a small number of retail investors who were smart enough made a lot of money. We had another bank privatization in 1997 and, shortly afterwards, TP SA. But of course this is a really big one."
Demand was so great that Treasury Minister Jacek Socha subsequently announced the volume of shares available to individual investors may be increased from 25 percent to 40 percent, with the remainder of the shares to be divided between large investors and foreign investors. A final decision on the distribution of shares will be taken on November 3.
The IPO is also being credited with breathing new life into brokerage houses and potentially increasing liquidity on the stock exchange. Parkiet recently reported that the stock sale has sparked a big rise in traffic. It is thought that brokerage houses are opening up to 900 accounts a week as opposed to the 200-300 new accounts they handled a week at the beginning of the year.
Millennium Dom Maklerski's head of research Marcin Materna says: "This will definitely have a positive affect on brokerage houses. Although it may well be that this will just be in the short term. Many investors are opening new accounts or re-opening old accounts in order to buy shares, because the fee to do this is relatively small-something like zł.50."
Whether retail investors cash in their shares straight away or keep hold of them will largely depend on their eventual market value. Those who took out deposit accounts have already been handed a 4 percent discount on the share value. However, if the allocation is retained for 12 months PKO BP will credit the owner with an extra 5 percent of their shares.
Korczak says the deposit accounts were a smart move by the State Treasury, but they have caused consternation among dealers. "It got people who didn't already have deposit accounts to put money into the bank. The bank will be able to use the money until the share allocation takes place in two or three weeks."
He expects both big domestic and foreign investors to be similarly interested in the issue. "Really the retail investors are a bit of a headache for the big investors because if retail investors are interested then the share for big investors is reduced. At the end of the day, big share investors will be under-represented, but then there will be redistribution over some period of time, probably at a higher price."
He says this increase in traffic may be to everyone's benefit: "Investors in Poland have a wide exposure to the banking industry but at the moment there is a lack of liquidity. Trading in PKO BP will help boost liquidity and that will have a knock-on effect on the brokerage houses, but it is difficult to say whether this will be sustained."
The bank was flooded with requests to set-up special privatization deposit accounts as long queues formed outside PKO BP branches across the country. Within six hours of opening its doors for business 65,000 people had signed up for the relevant accounts that will allow them to purchase a maximum of zł.20,000 of the zł.1.1 billion block of shares earmarked for Poland's ordinary investors.
The sale is Europe's largest initial public offering of the year and Poland's biggest since Telekomunikacja Polska's in 1998. The government hopes the partial privatization will raise zł.6 billion for its budget coffers.
The State Treasury's retail investor package is seen by market watchers as an excellent tool to encourage Poles to embrace privatization. CA IB Securities' equity analyst for banks Jakub Korczak says: "The way this privatization has been managed is educational for Poland's retail investors. Getting more people interested in the stock exchange is a good thing. If they earn money on one stock then they are more willing to participate in more privatizations.
"The thing that was different this time was the construction of the first part of the retail transfer into privatization deposits. This kind of angle was not used before and got people to put money into the bank."
Korczak says previous big privatizations have been well received. "In terms of banking stocks, Bank Śląnski created a huge public interest in shares when it was privatized in 1993. It was the one where a small number of retail investors who were smart enough made a lot of money. We had another bank privatization in 1997 and, shortly afterwards, TP SA. But of course this is a really big one."
Demand was so great that Treasury Minister Jacek Socha subsequently announced the volume of shares available to individual investors may be increased from 25 percent to 40 percent, with the remainder of the shares to be divided between large investors and foreign investors. A final decision on the distribution of shares will be taken on November 3.
The IPO is also being credited with breathing new life into brokerage houses and potentially increasing liquidity on the stock exchange. Parkiet recently reported that the stock sale has sparked a big rise in traffic. It is thought that brokerage houses are opening up to 900 accounts a week as opposed to the 200-300 new accounts they handled a week at the beginning of the year.
Millennium Dom Maklerski's head of research Marcin Materna says: "This will definitely have a positive affect on brokerage houses. Although it may well be that this will just be in the short term. Many investors are opening new accounts or re-opening old accounts in order to buy shares, because the fee to do this is relatively small-something like zł.50."
Whether retail investors cash in their shares straight away or keep hold of them will largely depend on their eventual market value. Those who took out deposit accounts have already been handed a 4 percent discount on the share value. However, if the allocation is retained for 12 months PKO BP will credit the owner with an extra 5 percent of their shares.
Korczak says the deposit accounts were a smart move by the State Treasury, but they have caused consternation among dealers. "It got people who didn't already have deposit accounts to put money into the bank. The bank will be able to use the money until the share allocation takes place in two or three weeks."
He expects both big domestic and foreign investors to be similarly interested in the issue. "Really the retail investors are a bit of a headache for the big investors because if retail investors are interested then the share for big investors is reduced. At the end of the day, big share investors will be under-represented, but then there will be redistribution over some period of time, probably at a higher price."
He says this increase in traffic may be to everyone's benefit: "Investors in Poland have a wide exposure to the banking industry but at the moment there is a lack of liquidity. Trading in PKO BP will help boost liquidity and that will have a knock-on effect on the brokerage houses, but it is difficult to say whether this will be sustained."
