New market opening for SMEs

The Warsaw Stock Exchange is currently busy preparing for the launch of a new market, set to take place later this year. The undertaking, currently referred to as the "New Market" (Nowy Rynek), is designed for SMEs with a capitalization of around zł.20 million and an IPO value ranging from hundreds of thousands to millions of złoty.

"This is an offer for investors who are ready to accept a higher investment risk, but want to earn higher profits," said Ludwik Sobolewski, president of the WSE's board.

The Ministry of Economy hopes this new platform will fill a gap in the current system for financing SMEs, which generally involves bank credit or other forms of loans. It is meant to provide opportunities for smaller companies which, because of their size, lack of market experience or capital, cannot be listed in the regular market.

Procedures governing entry into the New Market have been simplified, in comparison with a WSE debut. Firms can decide whether they want to prepare an issue prospectus, allowing for a public offering, or a cheaper and simpler "permission document" that allows a private offering and enables the firm to debut on the floor within five days.

In order to minimize investment risks, debuting companies will be required to engage the services of both an authorized adviser and a broker. The former must be chosen from a list created by the WSE, and its role will be to introduce the firm to the market, supervise it and help it fulfill its obligations. The latter will be responsible for aspects of share emission and information policy. Firms will need to employ an adviser for one year after debuting and a broker for two.

The new financing platform is to offer benefits for both issuers and the stock exchange. For firms, it will provide an effective method for acquiring capital and it will offer new opportunities, such as access to new business partners, development of the firm's reputation and the prospect of a future transition to the larger bourse. The WSE's board hopes that the New Market will strengthen the Warsaw bourse's position as the CEE region's prime financial center.

SMEs will have to wait until Q3 or Q4 to raise capital on the market. "The New Market will be opened by the end of September," Sobolewski stated. "We would like 10 firms to debut there by the end of year, and a few dozen in 2007."