Банкеръ Weekly



After the investment company Nadezhda sold its stake in the Plovdiv-based cosmetics manufacturer Alen Mak, it was logical to wind it down and distribute the money between its shareholders. Instead, a publication in the Official Gazette on Tuesday (April 23) announced that an increase of the investment company's capital would be discussed at its general meeting, scheduled for June 3, Keneth Lefkovitz, Director of the Austian investment corporation EPIK, which was among the founders of the former privatisation fund, explained to the BANKER weekly that an increase of the par value from BGN1 to BGN3 apiece of Nadezhda's shares was projected. As a result of that increase from the accumulated reserves, the investment company's capital will reach BGN1,656,000.The fund's present investments do not very much suit a structure of that type. The money is distributed in government securities and short-term bank deposits. Investors in Nadezhda would certainly have similar yields if they managed their money themselves, without paying remunerations to a supervisory and a management board and other expenses. The investment fund intends to follow privatisation on the stock exchange against compensation instruments, Mr. Lefkovitz commented. However, no decision has been made if the company would take part in the distribution of the state-owned minority packages in big Bulgarian companies.According to Nadezhda's annual report for 2001, its equity capital was BGN2,508,000 but it decreased considerably after Alen Mak's shares which were the company's only more serious long-term assets, were sold out in February 2002. Then, the 25,327 Alen Mak shares, held by Nadezhda, were acquired by the cosmetic producer's majority owner Effecten und Finantz-Bulgaria at BGN10.50 apiece. A total of BGN265,933.5 went onto the fund's accounts from that deal. And the check of Nadezhda's financial report showed that the same shares were evaluated at BGN1.1MN-plus. Thus, the investment company lost more than BGN830,000 (a third of its worth) from a single transaction. Hence, each share in Nadezhda is already valued at BGN3, which will be the future par value of the investment company's stocks.The case smells of scandal due to the undervalued price at which Alen Mak's shares were traded. For quite a long time these shares were asked at the stock exchange at BGN10-12/apiece, but such levels were considered low and there was no availability. It is curious how in this situation Nadezhda's managers made a quick decision to sell the package at BGN10.5/apiece. Since mid-March Alen Mak's quotations dropped drastically to BGN2 per share due to the forthcoming 25-fold increase of the cosmetic manufacturer's capital. The shareholders, however, will not lose from the price decrease because they may subscribe for new stocks from the new issue, proportionally to their participation as of March 26.The lack of many deals in Alen Mak shares due to the few selling offers was the reason for accepting the level of BGN10.5/apiece as their average market price. This served as an excuse to the cosmetic producer's Swiss owner to place an inofficial tender offer for the purchase of the shares at some BGN12.05/apiece. The exact price will become known after the prospectus for the increase of Alen Mak's capital is approved by the State Securities Exchange Commission (SSEC). The shareholders who want to sell their stocks at that price will be able to do that in the days between SSEC's approval and the beginning of the subscription.Alen Mak's lawyer Dimitar Dimitrov, who is also a member of the company's Supervisory Board, specified that the prospectus was almost ready and would be moved to the SSEC the following week.

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