4. The Romanian public equity market

Equity capital plays an important role in financing long-term investments with uncertain outcomes, including research, development and innovation. Equity is particularly well-suited to finance investments in intangible assets without strict collateral requirements compared to loan financing. Equity capital also plays an important role in providing companies with the financial soundness and flexibility needed to endure crises and meet financial obligations. For example, following the outbreak of the COVID-19 pandemic in 2020, both listed and new listed companies raised significantly higher amounts of equity capital through the public markets worldwide compared with previous years.

After a long period of inactivity, the Bucharest Stock Exchange (BVB) was re-established as a public interest institution in 1995 and later that year the first trading session took place. In 1997, the exchange listed the first companies of national importance and created the first stock market index BET. The exchange was demutualised and became a joint stock company in 2005. The BVB also merged with Rasdaq, the Electronic Exchange of Securities from Bucharest that same year. In 2010, the BVB became a listed company with its shares trading on the Regulated Market. In 2015, the exchange launched the AeRO Market, a multilateral trading system (MTS) dedicated to serving SMEs. By the end of 2020, 72.17% of BVB’s share capital was in the hands of Romanian institutional investors, 5.25% was owned by foreign institutional investors and 19.96% by Romanian private individuals (BVB, 2021[1]).

Developing the capital market has been one of the Financial Supervisory Authority (FSA)’s main objectives since 2014. An important milestone for the Romanian capital market was the upgrade from Frontier to Secondary Emerging market status by the global index provider FTSE Russell. The decision was made in 2019 after Romania had been on the monitoring list for three years and it took effect in September 2019. The reclassification as Secondary Emerging market increases the visibility of the Romanian stock market and decreases the country risk premium since the new status places Romania in the investable universe of a wider range of investors. In addition, a series of measures were adopted to increase transparency and ease market access overall, raising the attractiveness of the local capital market.

The reform process that took place in Romania during the 1990s provided the legal and regulatory framework for the creation and operation of private corporations. The enterprise reform of 1990 (Romanian Parliament, 1990[2]) gave birth to commercial companies and Romania also adopted the Commercial Companies Law to regulate the functioning of these entities. The process was accompanied by market reforms, including a competition law and price liberalisation. As part of the reform process, the capital market in Romania was fully recreated in 1994 with Law No. 52/1994 (Romanian Parliament, 1994[3]) on the functioning of securities and stock exchanges (OECD, 2001[4]).

In April 1995, the Bucharest Stock Exchange was re-established as a public interest institution. In 2006, the Central Securities Depository (CSD) was established, with the mission to ensure the clearing and settlement of transactions. This institution keeps records of the issuers’ shareholder registries. Today, the BVB remains the major shareholder of the CSD with a 69% stake, the rest being in the hands of other private entities.

As in other countries, the central securities depository in Romania is a key institution for the functioning of the capital market. It provides and maintains securities accounts at the top tier level in the RoClear system (‘central maintenance service’) and provides the initial recording of securities in the RoClear system (‘notary service’). It facilitates the transfer of financial instruments and money between the seller and the buyer. Settlement is done using the delivery versus payment (DVP) principle and takes place two days after the transaction date. The CSD updates and keeps the shareholders’ register of the financial instruments safe. The institution provides a large number of auxiliary services to participants, issuers and financial instrument holders. Currently, a Central Counterpart clearinghouse (CCP) is not yet in place in the Romanian market. However, the FSA is committed to supporting its establishment in accordance with best practices.

The Bucharest Stock Exchange operates two markets: the Main Market, which is the regulated market, and the alternative trading system, the AeRO Market. The Main Market targets large mature companies, whereas the AeRO Market is designed for SMEs. To become listed on the Main Market companies are required to be legally structured as a joint stock company and to have a minimum market capitalisation of EUR 1 million. In addition, companies are required to have at least a 25% free-float and a minimum of three years of financial reporting history. There are specific requirements for the three tiers of the Main Market: Premium, Standard and International (Table ‎4.2).

The AeRO Market is designed to serve the needs of SMEs that do not yet meet the size or the time of operation criteria necessary for listing on the Main Market. In order for a company to be listed on AeRO, it needs to have an anticipated market value of at least EUR 250 000 and a minimum of 10% free-float or at least 30 shareholders. Companies seeking to raise capital on the AeRO Market have to be established as a joint stock company (SA) prior to the listing. A summary of the main requirements are listed in Table ‎4.3 below.

In 2008, the Bucharest Stock Exchange (BVB) adopted a Corporate Governance Code to be implemented by listed companies on a comply-or-explain basis. The code was most recently revised in 2015 and entered into force in January 2016 (BSE, 2015[5]). The BVB also provides a manual and a compendium of Corporate Governance Practices to help companies implement the code.

All companies listed on the Main Market are supposed to implement the Corporate Governance Code. They shall include a corporate governance statement in their annual report containing a self-assessment on how the “provisions to comply with” are observed and include the measures taken to comply with provisions that are not fully met. The code establishes some specific requirements for the companies listed on the Standard and Premium Tiers. For example, companies listed on the Standard Tier should have at least one independent board member in their board of directors or in the supervisory board. For companies listed on the Premium Tier, no less than two non-executive members of the board of directors or supervisory board should be independent. In addition, these companies are required to set up a nomination committee formed of non-executives, which will lead the process for board appointments and make recommendations to the board. Additionally, the majority of the members of the nomination committee of the Board of Premium tier companies should be independent. Moreover, regarding the risk management and internal control system the boards of companies listed on any of the three tiers of the Main Market should set up an audit committee with at least one independent non-executive member. In the case of Premium Tier companies, the audit committee should be composed of at least three members and the majority should be independent.

In addition to the fees paid to the investment banks for underwriting their securities and to the auditors, companies also pay listing fees to the exchange and to the ASF (a percentage of the offering) as well as a prospectus fee and a registration fee (both also to the ASF). There are also fees related to the central depository functions. The fees paid to the exchange are comprised of a fixed processing fee, a variable admission fee and a maintenance fee (Table ‎4.5).

The Bucharest Stock Exchange has two segments, the Main Market – which is split into three tiers: Standard, Premium and International – and the Multilateral Trading System (MTS) AeRO which includes the AeRO Base, AeRO Standard and AeRO Premium. The Main Market has 76 listed companies (as of end 2020), of which 54 (71%) are listed on the Standard Tier (Table ‎4.6). The market capitalisation of the Main Market totals EUR 28.8 billion, with EUR 1.7 billion in the Standard Tier, EUR 15.6 billion in the Premium and EUR 11.5 billion in the International Tier. The AeRO Market has 242 listed companies of which 222 (92%) are in the Standard Tier. The market capitalisation of this segment totals EUR 1.2 billion.

With respect to the industry distribution of the listed companies of the BVB, Industrials accounts for 26% and 38% of the number of listed companies on the Main Market and the AeRO Market, respectively (Figure ‎4.1). Companies from the consumer cyclicals are also important issuers on the BVB, representing more than 20% of the listed companies on both segments. While 11% of the companies listed on the Main Market are financials (8 companies), their share on the AeRO Market is 1% (2 companies). Eight percent of the companies on the Main Market are technology and health care companies and in the AeRO Market their share totals only 2%.

Since 2000, 31 new listings and 52 delistings have taken place on the Main Market of the Bucharest Stock Exchange (Figure ‎4.2, Panel A). Net listings were positive until 2007, a period when not a single company delisted from the market. However, since then, delistings have mostly surpassed new listings and since 2018 no new listings have taken place on the Main Market. Since its inception in 2010, the MTS Market – AeRO – had 17 new company listings (Figure ‎4.2, Panel B). Regarding delistings, which started in 2015, a total of 31 companies delisted until 2019. In 2020, net listings on the AeRO Market were at a historical low level with only three new company listings and 13 delistings.

In November 1996, the Rasdaq market was launched as an alternative equity exchange in which around 5 000 Romanian companies – following the Mass Privatisation Programme – were listed. Similar to experiences in other transition economies, many of the listed companies were not able to meet the listing requirements and were subsequently forced to delist from the market (Pop, Georgescu and Balint, 2014[6]). In December 2005, the Bucharest Stock Exchange acquired Rasdaq and converted it into an over the counter electronic stock market. During the 1996-2000 period Rasdaq’s reputation was plagued by share theft, price manipulation and severe opacity. In addition, since 2010, the absence of a legal status for Rasdaq as a trading platform added to existing reputational concerns, leading to a decline in the trading volume from 2012. Thus, after the BVB’s acquisition, only eight new listings took place, coupled with more than 3 000 delistings until its dissolution in 2015, when almost 300 companies were transferred to the AeRO Market (Figure ‎4.2, Panel C).1

A company wishing to raise equity can do so by listing its shares on one or more stock exchanges by conducting an initial public offering (IPO). This section describes IPO activity in Romania and selected European peer countries during the last 20 years. Since 2000, 18 Romanian companies have conducted an IPO and together raised EUR 1.3 billion in proceeds. While from 2000 to 2009, 11 companies went public, the proceeds accounted for only 14% of the amount raised over the entire 2000-19 period. During the 2010-17 period, seven companies raised 86% of the total proceeds (EUR 1.1 billion). No companies went public in 2018 and 2019.

Although IPO activity was more dynamic in Romania in the last 10 years compared to the early 2000s, the market has not yet fully developed and the number of companies making use of public equity markets remains limited and still lags behind regional peers such as the Czech Republic, Austria, Poland and Germany. It only surpassed the IPO activity in Hungary, where a total of 15 IPOs have raised a modest EUR 544 million since 2000 (Figure ‎4.3). Romanian IPOs accounted for only 0.24% of the total funds raised by EU companies through IPOs over the entire period.

The largest IPO by a Romanian company took place in 2014 when the electricity distribution and supply company Electrica SA raised a record amount of EUR 460 million, with a primary listing on the Bucharest Stock Exchange and a secondary listing on the London Stock Exchange (Table ‎4.7). The natural gas production company SNGN Romgaz SA raised almost EUR 400 million in its IPO in 2013 with its primary listing on the BVB and secondary listing on the London Stock Exchange. Five out of the 18 Romanian IPOs were conducted by a state owned company, representing almost 90% of the total proceeds raised since 2000. The three most recent Romanian IPOs took place in 2017, when Sphera Franchise Group SA raised EUR 64 million, Transilvania Broker de Asigurare SA EUR 2 million and SC AAGES SA EUR 1.2 million.

Utilities company IPOs in Romania accounted for more than half of the total proceeds raised over the 2000-19 period, followed by energy companies which raised 33% of the total proceeds (Figure ‎4.4). This trend differs from European peers where utilities IPOs are much less common, representing only 19% of the proceeds in Poland and being almost non-existent in Austria, Germany, Hungary and the Czech Republic. While consumer cyclicals IPOs make up 20% and 17% of the funds raised in the Czech Republic and Germany, respectively, in Romania their share was only 8%. Importantly, the technology and health care industries together account for only 5% of the Romanian IPOs, whereas in the European Union they make up 17% of total proceeds.

Companies that are already listed can raise additional equity on the primary public equity markets through secondary public offerings (SPOs or follow-on offerings). A company can make use of this recapitalisation source several times depending on its funding needs. The proceeds from the SPOs may be used for a variety of purposes and can also help fundamentally sound companies bridge a temporary downturn in economic activity. SPOs played an important role in providing the corporate sector with equity capital in the wake of the 2008 financial crisis and through the 2020 COVID-19 crisis.

In the European Union, companies made extensive use of SPOs, raising almost EUR 2 trillion over the last 20 years (Figure ‎4.5). German firms alone raised almost 20% of the EU’s total proceeds. Austrian and Polish companies also tapped the SPO market regularly over the 2000-19 period, with proceeds of EUR 42 billion and EUR 30 billion respectively. However, companies in the Czech Republic, Hungary and Romania together accounted for only 0.36% of the total EU proceeds, amounting to EUR 6.4 billion.

Since 2000, Romanian companies have conducted 28 SPOs raising a total of EUR 1.9 billion, the lowest amount among European peer countries (Figure ‎4.6). Indeed, until 2008, SPO activity in Romania was non-existent, with the exception of one consumer cyclicals company back in 1996. Since 2008, an average of two SPOs have taken place annually. In terms of proceeds raised, 2011 saw a record amount of EUR 554 million to a large extent driven by the state controlled energy company OMV Petrom SA’s first SPO. In 2016, the SPO activity in Romania was driven by the second SPO of OMV Petrom SA and the offering by another state controlled energy company SNGN Romgaz SA which together raised a total amount of EUR 305 million. Importantly, in 2018 and 2019 only one company conducted an SPO.

Financial companies are usually frequent users of secondary offerings. In the European Union, financials account for 37% of the total proceeds raised through SPOs since 2000 (Figure ‎4.7). In Poland and Austria, financial companies accounted for more than half of the total proceeds raised. In Germany, financials represented 32%, in the Czech Republic 27% and in Romania for 26% of the proceeds raised. In Hungary, Financials are less prominent, representing only 9% of the total proceeds. Apart from financials, energy and basic materials companies have been important users of SPOs in Romania, accounting for 43% and 24% of the amount raised, respectively. While in the European Union, technology and health care SPOs together represent 9% of the funds raised, in Romania companies from those two industries have never conducted an SPO.

The level of liquidity in the secondary stock market is an important factor influencing investors’ demand for stocks, as greater liquidity reduces the risk premium of holding stocks and increases the efficiency of the price discovery mechanism. A liquid market may also help attract more issuers, who would expect the market to price their securities more accurately. Importantly, empirical evidence shows that low liquidity levels can increase the cost of equity for companies wanting to raise capital as investors require a higher expected return to compensate for the extra risk of reduced liquidity (IMF, 2016[7]).

In recent years, liquidity measured as the turnover ratio has been low in Romania, averaging 6.8% since 2015 on the Main Market of the BVB. The situation is identical on the alternative AeRO Market, where the average turnover ratio has been 3.1% (Figure ‎4.8, Panel A). Other markets in the CEE region such as the Czech Republic, Austria, Hungary and Poland also had liquidity levels well below the EU average of 58%, but Romania ranked by far the lowest as shown in Panel B of Figure ‎4.8.

By the end of 2019, there were 77 companies listed on the regulated market of the Bucharest Stock Exchange. Industrials companies accounted for 26% of the total, followed by consumer cyclicals companies accounting for 21%. However, by market capitalisation, energy companies account for almost half of the total listed equity with financial companies representing another 26%.

Ownership information was available for 59 of the listed companies on the regulated market of the exchange. To identify the ownership structure, investors were classified into the following categories of investors: corporations, public sector, strategic individuals, institutional investors and other free-float (De La Cruz, Medina and Tang, 2019[8]). At the market level, private corporations and holding companies is the largest investor category holding 30% of the listed equity (Figure ‎4.10). Their relative importance as owners in the equity market is much higher compared with other European peer countries and the EU. The public sector ranks second owning 29% of the total market capitalisation. Institutional investors are not large investors in the Romanian market compared with their importance in other European markets such as Germany, Hungary and Poland where they own around 30% of the listed equity.

The ownership structure in the Romanian stock market is fairly concentrated (Figure ‎4.11, Panel A). In six of every ten listed companies the largest single shareholder holds over 50% of the equity capital. This level of control and concentration is much higher than in other European countries. More importantly, corporations and holding companies are not only the largest owners at the aggregate level, they are also the most common largest shareholders at the company level as they own on average 54% of the equity in almost 40% of the listed companies (Figure ‎4.11, Panel B). The public sector is also an important owner, but in fewer companies. It holds an average of 56% of the listed equity in 17% of the listed companies. The institutional investors that are the largest owners in 19% of the companies are predominantly mutual funds and investment advisors.

The public sector plays an important role in the Romanian economy and Romania has the largest number of SOEs in Europe (Statecapture, 2018[9]). At the end of 2016 Romanian SOEs accounted for a high share in total employment and contribution to the total value added compared to SOEs in many countries in the region (IMF, 2019[10]). The government is also a majority shareholder in ten listed companies. At the industry level, public sector holdings are concentrated in Utilities and Energy companies (Figure ‎4.12, Panel A). At the end of 2020, almost half of the market capitalisation of the energy industry, the largest industry in the stock market, was held by the public sector. With respect to ownership by institutional investors, two-thirds were in the hands of domestic institutional investors and one-third was held by foreign institutions (Figure ‎4.12, Panel B).

As mentioned above, private corporations and holding companies is the largest category of investors in the Romanian stock market holding 30% of the listed equity. Domestic corporate investors concentrate their holdings in telecommunications and industrials companies, while foreign corporate investors hold significant stakes in the healthcare, financials, energy, consumer non-cyclicals and basic materials industries (Figure ‎4.13, Panel A). Foreign corporate investors account for 87% of corporate investors’ total holdings in Romania. Half of the foreign corporations and holding companies that invest in the Romanian equity market are from Austria, 26% are from France, and 6% are from the Netherlands (Figure ‎4.13, Panel B).


[5] BSE (2015), Code of Corporate Governance, https://bvb.ro/info/Rapoarte/Diverse/ENG_Corporate%20Governance%20Code_WEB_revised.pdf.

[1] BVB (2021), “Shareholding structure as of December 31, 2020”, The Bucharest Stock Exchange website, http://www.bvb.ro/FinancialInstruments/SelectedData/NewsItem/BVB-Structura-actionariat-la-data-de-31-decembrie-2020/F9B4E.

[8] De La Cruz, A., A. Medina and Y. Tang (2019), “Owners of the World’s Listed Companies”, OECD Capital Market Series, Paris, http://www.oecd.org/corporate/Owners-of-the-Worlds-Listed-Companies.htm.

[10] IMF (2019), “Reassessing the Role of State Owned Enterprises in Central, Eastern, and Southeastern Europe”, IMF Working Paper, Vol. 19/11.

[7] IMF (2016), “Stock Market Liquidity in Chile”, IMF Working Paper Series, WP/16/223, http://www.imf.org/en/Publications/WP/Issues/2016/12/31/Stock-Market-Liquidity-in-Chile-44405.

[4] OECD (2001), “Corporate Governance in Romania”, http://www.oecd.org/corporate/ca/corporategovernanceprinciples/2390703.pdf.

[6] Pop, C., A. Georgescu and C. Balint (2014), “Was RASDAQ doomed from the start? A preliminary investigation”, International Finance and Banking Conference, FI BA 2014, https://doi.org/10.2139/ssrn.2426066.

[3] Romanian Parliament (1994), “LEGE Nr. 52 din 7 iulie 1994 privind valorile mobiliare şi bursele de valori”, Monitorul Oficial, https://legislatie.just.ro/Public/DetaliiDocumentAfis/4181.

[2] Romanian Parliament (1990), “LEGE nr. 15 din 7 august 1990 privind reorganizarea unităților economice de stat ca regii autonome și societăți comerciale”, Monitorul Oficial, https://legislatie.just.ro/Public/DetaliiDocument/755.

[9] Statecapture (2018), “National Report Romania”, https://www.researchgate.net/publication/322340931_STATE-OWNED_COMPANIES_IN_ROMANIA_PREVENTING_CORRUPTION_CLIENTELISM_AND_STATE_CAPTURE.


← 1. These 300 companies transferred to the AeRO Market were not considered as new listings.

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