Oltchim: Corruption fight hinders capital increase

The best opportunity for the Stock Exchange speculators this year, the share capital increase at Oltchim, might quickly turn into losses. The capital increase was not endorsed, and brokers are expecting to see Oltchim shares plunge as of Monday, when trading on the Stock Exchange is resumed.
The capital increase by including the reassessment reserves was not endorsed because of a law enacted by Parliament and published in the Official Gazette two days before the first call of the General Shareholders Meeting, which prohibits such operations. A normative act on securing transparency of the business environment among others, as well as preventing and punishing corruption modifies the trading companies law by stipulating “any favourable gaps derived from asset reassessment shall be included in reserves and not in the share capital.” The high inflationary level over the last few years has made asset reassessment and including these gaps into the share capital quite a common occurrence on the capital market.
The price of Oltchim shares went up from 600 ROL/share to 2,000 ROL/share early this month, due to summoning the General Meeting of Shareholders for increasing the share capital. The rise began before the official announcement was made and the National Securities Commission (CNVM) launched an insider trading investigation. After having peaked at 2,000 ROL, the Oltchim shares took a slightly downward trend. The market had been talking about the impossibility of such a capital increase since mid April, blaming it on the fact that Oltchim uses the IAS as part of a pilot project, which prohibits it from increasing capital by including reassessment gaps.
Oltchim is planning to narrow losses down to half this year, which would therefore reach 665bn ROL instead of the 1,116bn ROL in 2002. Turnover is supposed to remain the same as in 2002: $215 million.
Some investors have not sold their shares yet, saying they will gain even more as soon as they get the nine bonus shares, the market price of which they estimated at 300 ROL, compared with the 1,800 ROL for which the shares were trading. They are precisely the ones to incur heavy losses next week.
Albeit the provisions of the law look clear, APAPS (Privatisation Authority), the majority shareholder of the chemical plant endorsed “a postponement of the talks” about the share capital increase, with this proposition set to be debated in a later meeting.
Brokers recall they experienced something similar in 2001, when it was about aluminium plant Alro Slatina’s shares. Back then, several capital increase propositions caused shares to spectacularly increase, but were not approved by shareholders so that quotations collapsed.