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The Warsaw Voice » Business » July 2, 2010
Business & Economy
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NewConnect Draws Foreign Firms
July 2, 2010   
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Many owners of small and medium-sized enterprises are still convinced the Warsaw Stock Exchange is totally out of reach for them. Meanwhile, the NewConnect alternative market, set up almost three years ago, provides such businesses with a perfect opportunity to obtain capital for further development, evaluate a company, build a well-recognizable brand and eventually move to the main Warsaw Stock Exchange market.

Due to high risk assessment, small and medium-sized enterprises find it virtually impossible to obtain a bank loan or private equity funding from a financial institution for an innovative start-up. NewConnect enables such businesses to obtain market valuation and capital to launch operations and for individual investors, investment in such businesses is a guarantee of a high rate of return. Eficom SA, which debuted on the NewConnect market in December 2007, is now an Authorized Adviser and has recently brought MEW SA-Małe Elektrownie Wodne, which specializes in renewable energy, onto the NewConnect market. Eficom is also bringing the Novainvest SA Capital Group which deals with broadband internet services, onto the NewConnect market.

NewConnect is becoming increasingly popular with small and medium-sized enterprises and the first issuers from abroad are appearing on it as well. Photon Energy from the Czech Republic is the first foreign company to be listed exclusively on the Warsaw Stock Exchange and several companies from Greece and the United States are preparing their debuts. The Warsaw Stock Exchange has selected a group of fundamentally healthy, innovative Greek companies listed on the stock exchange in Athens that want to enter the NewConnect and the main market. There are also three non-Polish Authorized Advisers on the market. Teaming up with American consulting companies, Eficom is planning to introduce several companies from abroad as well.

The NewConnect market was established in June 2007, targeting dynamic new companies with rapid growth potential. It is primarily designed for companies that seek capital ranging from several hundred thousand to tens of millions of zlotys, that operate in innovative sectors and in the long run are planning to enter the main market of the Warsaw Stock Exchange. NewConnect is also open to companies in more traditional sectors, provided they come up with attractive development plans. The average free float on NewConnect is 30-35 percent and capitalization averages between 10 and 40 million zlotys. NewConnect mainly attracts individual investors and such dispersed stock ownership allows existing shareholders to keep control over their companies.

An extra benefit of NewConnect is the much lower debut cost than on the main Warsaw Stock Exchange market, coupled with simpler procedures. A company’s information document, equivalent to a prospectus, is approved by the Warsaw Stock Exchange instead of the Polish Financial Supervision Authority. Newcomers can hold either a private offering for up to 99 investors or a public offering. Since it is necessary to ensure reporting security for investors, reporting obligations on NewConnect are very similar to those on the main market, except for twice-yearly audit reports.

NewConnect is also a good way to promote a previously often largely unknown company and its products and services. By debuting on NewConnect, companies become listed and thus boost their credibility by taking advantage of the Warsaw Stock Exchange brand and prestige. Every company that chooses to enter NewConnect signs a contract with an Authorized Adviser whose role is to prepare the company for the debut and then work with it for at least one year afterwards, providing consulting on fulfilling NewConnect reporting obligations.

A total of 131 companies are listed on the NewConnect market and the number awaiting their debut is growing steadily. The first six months of this year saw a record 27 new companies on NewConnect, compared with 26 debuts in the whole of last year.

NewConnect fills a gap on the capital market, presents funding opportunities for many companies to stimulate their development and provides investors with an opportunity for high profits.

Anna Katarzyna Nietyksza
President of the board, Eficom SA
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