Romanian entrepreneurs seize growth opportunities through BVB’s AeRO market

AeRO, the small-cap growth market of the Bucharest Stock Exchange (BVB), attracted 17 new companies this year, with more entrepreneurs and investors looking to tap the platform. BR sat down with BVB CEO Adrian Tanase to learn more about AeRO and understand how businesses can use it as a launchpad for listing on the main market.

By Ovidiu Posirca

How are entrepreneurs, especially startup founders, perceiving the local capital market in terms of business opportunities?

In the last couple of years, we’ve seen a change in entrepreneurs’ perception of the Bucharest Stock Exchange (BVB), as more and more of them are starting to view the stock market as a source of financing for the development of their companies, offering opportunities which may be otherwise inaccessible. There are also complementary results that the local capital market has brought to entrepreneurs, including increased visibility and a new approach to business, based on increased transparency and enhanced communication.

In 2021 alone, 19 new companies have listed their shares, two of them on the main market, with EUR 60 million each, and 17 on our small-cap growth market, AeRO, with an average ticket size of roughly EUR 2 million. In addition, so far we’ve had 25 bond issuances on the stock exchange as well as nine government bonds, worth almost EUR 1.4 billion. This year’s evolution has once again proven the potential of our market in terms of attracting new companies, from different business sectors, as well as new retail investors.

How has the BVB’s AeRO platform performed during the pandemic economy and what are your plans for this market going forward?

The BVB has been providing financing opportunities for startups and SMEs since 2010, through the Alternative Trading System (ATS). In 2019, the ATS became a Multilateral Trading System (MTS), based on the European Union’s MiFID requirements. This way, the BVB contributes to the development of the business environment and provides financing for companies' projects, including startups and SMEs, to support their growth. At the same time, the MTS brings in new opportunities for investors.

Since the beginning of this year, the AeRO market has recorded more than 265,000 trades, an almost threefold increase over the previous year. The total value of trades on the AeRO market is close to RON 1 billion, which means an increase of 182 percent compared to 2020. The average daily trading value has reached RON 4.6 million. The AeRO market has a capitalisation of RON 15.7 billion, the largest figure since the launch of this

market in February 2015. Since 2019, 21 new companies went public on the AeRO market, with a total market capitalisation of RON 1.74 billion. All these numbers demonstrate both individual investors’ growing interest in this market as well as the fact that it is an excellent opportunity for Romanian entrepreneurs.

The AeRO Growth Market will evolve to encompass all the financial instruments currently available on the MTS for entrepreneurs and investors. Through this new perspective, we will be better positioned to support Romanian companies on their path to development through capital market mechanisms.

We also recently launched BET AeRO, the first index for this market. 16 out of 20 companies that are currently part of this new index are companies that have gone public over the last few years.

What are the main operational and cost factors entrepreneurs should take into account when looking to list their company on AeRO?

First of all, they should fully understand what listing a company means and decide whether they really want to take this route. They need to understand that the capital market provides access to various financing mechanisms depending on their needs and their company’s stage of development.

We recently announced the implementation of a simpler, faster, and more efficient listing procedure on BVB’s Multilateral Trading System, which includes the AeRO market, starting with 2022. The new procedure is intended to further facilitate access to funding for entrepreneurial companies through capital market mechanisms.

Listing requirements on the AeRO market are more accessible than those on the Regulated Market. For example, companies on the AeRO market are subject to reporting annual and half-yearly results, while Regulated Market companies must also submit quarterly reports. As for quantitative criteria, to list on the AeRO market, a company must meet an anticipated market capitalisation of at least EUR 250,000 and list at least 10 percent of its shares (10 percent free-float) or have 30 shareholders.

What kind of feedback have you received from companies listed on the AeRO market? Are any of them planning to go public on the main BVB exchange?

We already have an example of such a move: Bittnet, which was the first IT company to list on the AeRO market, made this step in 2020. Bittnet is a model to follow for many companies in Romania, it is a story of accelerated growth on the stock market, a company that accessed all the development support mechanisms offered by the stock market. We are talking about capital increases by capitalising

profits and cash contributions from shareholders, bond issues, stock option programmes for team members, securing financing for the acquisition of other companies, and the list goes on. Recently, two additional AeRO-listed companies – Life is Hard and Holde Agri Invest – have announced their intention to progress from the AeRO market to the main market.

What’s missing from the domestic capital market right now?

I would like to phrase that as what can be improved on the capital market. Indeed, we would like to have more retail investors, and the growth trend has already begun. The increase in savings during the pandemic was a global trend, and it was visible in Romania too. At the end of 2020, non-government deposits exceeded RON 420 billion (EUR 85 billion), a 14 percent year-on-year rise, one of the highest of the last decade.

In terms of how these additional savings have impacted the participation of local investors in the stock market, rough numbers show an increase of almost a third in the number of retail investors since the start of the pandemic. In June 2021, data pointed to a total of 70,000 individual investors with stock exchange accounts.

Foreign investors are certainly very active in the region, Romania included, but there is significant room for improvement. We currently have a large number of local projects, as we believe there is significant growth potential in Romania. Successfully finalising this project and developing the futures market for securities and energy as well as setting up clearing mechanisms for the spot market are top priorities for us, and achieving these objectives would add a very important missing link to the Romanian capital market. We have also started to introduce ESG standards on the Romanian capital market and we’re seeing growing interest from companies to implement these standards, as this topic is gaining prominence in investment decisions for both local and international investors.

Another very important issue we’ve addressed is developing a broader analysis of local companies and we’ve managed to offer investors a free tool in this regard through the BVB Research Hub, where analysts from both Romanian and international brokers are publishing reports on companies that have not been previously covered.

We believe that if we manage to successfully implement our projects and deliver on our promises, and if Romanian companies keep delivering strong results, local and foreign investors will take notice and their interest will grow even further in the coming years.