Shares of Companies in Pre-Bankruptcy Settlements are Targets for Speculators

Shares of companies that have entered into pre-bankruptcy settlements and whose stocks are listed on the Zagreb Stock Exchange (ZSE) have become targets for speculators.

This was acknowledged by the CEO of the ZSE, Ivana Gažić, at a round table on the impact of pre-bankruptcy settlements on the capital market. Shares of 39 companies in pre-bankruptcy often record huge turnovers and price jumps in both directions, which operationally complicates the exchange’s business and increases the number of trading blocks. It is also not uncommon for speculative attacks to occur during hearings on the acceptance of restructuring plans, meaning that information leaks prematurely into the public domain, which is why the exchange blocks speculators.

Anđelka Buneta, CEO of FINA, stated that she is very satisfied with the way pre-bankruptcies are being handled. To date, 5,017 companies have applied for pre-bankruptcy with claims worth 49 billion kuna. Of these, 1,058 cases worth 11.8 billion kuna have been resolved, while the remaining 3,946 cases are in process.

– I am also pleased with the trend of applications for pre-bankruptcies. In January, we had a surge, and the monthly average was about 200 new companies in pre-bankruptcy. Now that average has fallen to 170, and we hope that soon we will not have any need for mass pre-bankruptcies at all – said Buneta.

The head of Erste Invest, Josip Glavaš, has not had too many bad experiences with pre-bankruptcies either, but he criticizes that most of the restructuring in companies is done by people who brought the same company to the brink of collapse. In his opinion, this undermines the trust of institutional investors such as investment and pension funds, which is why a constant practice should be the replacement of the entire management.

As additional negative aspects of pre-bankruptcies, Gažić identified the unpreparedness of courts that do not understand that a delay of two to three months can mean survival or collapse for many companies, while Glavaš is also concerned about the problem of moral hazard. He has identified many companies that are doing well but have gone into pre-bankruptcy solely due to the interests of the owners.

In conclusion, pre-bankruptcies should result in strengthened balance sheets of domestic companies and higher capitalization. The collapse of a few companies will not jeopardize the ZSE, for which the number of issuers is not crucial, but rather their health and quality ownership structure with a larger number of shareholders.