- Patrick Young
Summary
The Warsaw Stock Exchange ought to have set itself the highest possible standards of transparency for its IPO yet recent Polish media reports highlight that the exchange omitted to mention an ongoing criminal investigation by the Polish anti-corruption bureau.
Analysis
The issue lies not with the outstanding (and ongoing) investigation itself so much as with the fact that as a vendor the government ought to lead by example in terms of material disclosure while the stock exchange itself surely has to be seen to be as transparent as possible in its dealings in order to set a clear example to the many companies issuing on the exchange.
In this case the WSE (and one can argue the government) appear to have deviated from best practice in a manner that does not lead to greater investor confidence in either the WSE IPO itself nor other privatization issues.
This is a great pity as there is a great business case to be made for Polish investment. However, the management of WSE itself has made a distinctly strange call to try to keep hidden information that really ought to have been fairly and clearly disclosed in both the Polish Prospectus and the narrowly distributed English language documents.
Exchanges and governments must create confidence in markets. One way to do that is to be transparent in disclosing issues that are material to the valuation of a company. Whatever the nature of potential political machinations that might be behind any investigation, there is a clear need to divulge a criminal investigation that is not merely ongoing but has recently been extended in duration. Clients are capable of rational discussion of risk disclosures (as was evident with CBOE’s transparent policy on various outstanding legal issues) but exchanges and governments must make the information publicly available for fear of otherwise provoking a crisis of confidence in the transparency of the core institutions at the heart of traded markets.
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