Romanian entrepreneurs betting on the Stock Exchange held out better to the crisis

Only 15 Romanian companies have raised significant funding (of above 10m euros) from the Stock Exchange in the past six years, through IPOs or capital increases, while the vast majority preferred to borrow from banks. This can partly explain why hundreds of Romanian companies have gone insolvent in the past two years, unable to pay their instalments any longer. Calculations show that in the past five years (2005-2010) Romanian companies have raised a little more than 600m euros from the Stock Exchange through IPOs and capital increases through cash contributions by shareholders. By comparison, since late 2004 to April 2010, the volume of non-governmental lending granted to the private sector rose by around 20bn euros, pointing Romanian companies’ dependency on banking funding. Many explanations can be found for this situation, such as the aggressive expansion of foreign banks in Romania since 2004 and ease of getting banking loans, as compared to the quite intricate procedures in the case of public offerings or capital increases. Moreover, the capital market’s lack of depth makes foreign investment funds’ entrances or exits generate serious price fluctuations, which could cause listed companies trouble.