On July 12, Hidroelectrica, Romania’s state-owned power producer, registered gains in its debut on the trading market. It was the largest initial public offering (IPO) in Europe this year, suggesting that investor appetite for new share listings may be returning.

Hidroelectrica shares rose 9.7% on the Bucharest Stock Exchange before closing at 110 lei, above the IPO price of 104 lei, which valued the state-owned company at 46.8 billion lei ($10.4 billion). This significant growth shows the confidence of investors in the potential of the company and in the Romanian capital market. Thus, Hidroelectrica has demonstrated that it is an attractive choice for those interested in investing in the country’s energy sector.

On the first day of trading, the trading volume reached about 735.8 million lei, which is seven times higher than the daily average for the entire exchange this year. Such a boom in trading activity indicates the high interest of investors in Hidroelectrica shares. This is a positive signal for the capital market in Romania and could mean a change of direction in terms of investment in listed shares.

Romanian and international investors often ask themselves what is the best trading style in the capital market in Romania. In this context, the excellent performance of Hidroelectrica can be an inspiration for them. However, it is important to remember that every investor has his own goals and strategies. What works for one may not work for another. Therefore, investors should carefully analyze their options and determine their own trading style according to their risk tolerance, financial goals and experience level.

Hopes for a wave of IPOs

Hidroelectrica is one of the few European companies to rush to go public ahead of the summer slump, as bankers hope for a market recovery in the coming months after high interest rates effectively blocked an IPO in 2022. This strategic move by the company and the desire of investors for an IPO may indicate the return of confidence in the capital market both in Romania and in Europe.

Romania’s government hopes the IPO, which has been under discussion for more than a decade, will unlock European Union recovery funds and boost investment demand in the country. Through its listing on the commercial market, Hidroelectrica could attract significant investments that could contribute to the development of Romania’s infrastructure and energy sector.

Hidroelectrica owns 80% of the country’s largest electricity producer with a capacity of 6.3 gigawatts and 182 hydroelectric power stations. Such a dominant position of the company in the energy market provides it with stability and a long-term development perspective.

Purpose of sale of shares owned by Fondul Proprietatea

Fondul Proprietatea ( FP.BX ), a minority shareholder in a fund run by U.S. asset manager Franklin Templeton ( BEN.N ), has the option to raise up to $2 billion in an IPO, including an oversubscription option. As a minority shareholder, Fondul Proprietatea saw Hidroelectrica’s IPO as an opportunity to capitalize on its investment and secure significant returns.

Placement of shares was exceeded several times, 80% of shares went to institutional investors, including the largest pension funds of the country. Such oversubscription indicates a high level of confidence on the part of investors in the company’s development prospects and the economy of Romania as a whole.

A turning point for the Romanian capital market

“I believe that in five to ten years we will look at this moment as a defining moment in the history of the capital market in Romania”, – said Johan Mayer, portfolio manager of Fondul Proprietatea, during the share opening ceremony. Meyer’s statement underscores the importance and significant impact of Hidroelectrica’s debut on Romania’s capital market, the Bucharest Stock Exchange, a listing that could help it move to “emerging market” status in the MSCI indices, versus a “frontier market.”

This would be an important step for Romania’s capital market, as it could attract more foreign investors and strengthen Bucharest’s status as a strong regional financial center.

The need for liquidity and diverse offerings

With a combined market capitalization of about $46.2 billion, the Bucharest Stock Exchange needs liquidity and a more diversified offering, according to pension funds, one of the largest institutional investors. Diversification of portfolios and increased liquidity can attract more investors, thus creating a more dynamic and competitive capital market.

Conclusion

Hidroelectrica’s successful debut on the trading market is a promising sign for the IPO market in Europe and for the capital market in Romania. Hopes regarding the unblocking of EU recovery funds and growing investment demand may contribute to the positive development of the Romanian economy.

In addition, Hidroelectrica’s listing could strengthen Bucharest’s position as an emerging market, providing greater liquidity and diversity of stock market offerings. However, each investor must determine his own trading style based on his financial goals and the level of risk he can accept. By choosing the appropriate style and carefully analyzing the market opportunities, investors can achieve positive results and contribute to the economic development of Romania.