Warsaw Stock Exchange – What Future Does An IPO Hold?

  • Patrick Young

Summary

The leading CEE bourse, Warsaw Stock Exchange is finally about to IPO . Despite a great deal of success the markets remain immature in Eastern Europe and while there are leaders, a huge amount of development remains.

How can WSE develop and what may hold it back? Where are the drivers for Growth?

Analysis

The Warsaw Stock Exchange is, alongside the Vienna Bourse’s conglomerate business, the largest stock exchange in the “New Europe.” From a standing (re-)start during the past 2 decades, WSE has grown to some 400 stock listings and this year has easily absorbed 2 large privatizations (Tauron and PZU) with relative ease.

After several false starts (an IPO was cancelled during the credit crunch, a rather bizarre closed auction process was run last year only for other exchanges while ignoring willing bidders…)., the WSE has begun a book building process that means 65% of the company may soon be publicly traded.

Government ownership was perceived to have held Warsaw back from achieving cross border mergers – although the new share structure leads me to wonder how a government voting control can amend that situation? Realistically, the government needs privatization revenues to pay for a relatively bloated budget (albeit a minnow by comparison with many European ‘norms’) but ultimately the WSE has many exciting opportunities. At the same time the spectre of Polish protectionism is an issue from several angles for this business.

Moreover, despite the growth opportunity, WSE is hardly a takeover target given a several hundred person payroll and a relatively modest size of operations. In financial terms, this business is a rounding error compared to the titans like Deutsche Borse or CME Group. On the other hand, Poland has been leading growth in the New Europe and the region has a great many opportunities. The WSE is probably missing as many opportunities as it can exploit right now.

Nevertheless, the management has been efficient in the growth stage but many lack private sector work experience which worries some investors. The business is a potential powerhouse, although much work remains to be done before any exchange in CEE/SEE is actually dominant.

 

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