With the upcoming listing of Pollenity, and the freshly finalized listing of Webit, The Bulgarian Stock Exchange seems to be having quite the eventful week. Even though 2021 was the first complete year for the BEAM Growth Market, the segment set a record for the Bulgarian Stock Exchange with the completion of seven IPOs from different industries.
From today, Bulgarian small and medium enterprises can raise up to €8M on the Bulgarian Enterprise Accelerator Market (BEAM) segment of BSE. Following a legislative approval, the maximum amount that listed companies can raise increased more than twofold.
This opens new horizons for Bulgarian traditional and technological entrepreneurs who are considering alternative and additional ways of financing their growth. The Recursive invites you to get more familiar with the story, impact, and purpose of the BEAM growth mechanism in an interview with the CEO of BSE, Manyu Moravenov.
“We haven’t seen such a number of IPOs since 2007. The accumulated capital that companies listed on the BEAM market raised in 2021 amounts to nearly €15M. This may not seem that big, but 4 of the IPOs accumulated the maximum allowed level of €3M. We are more than happy that due to the success of the BEAM market more than 3000 new retail and institutional investors entered the Bulgarian capital market,” Moravenov points out.
4 years of BEAM
BEAM is an EU SME growth market that is organized by the Bulgarian Stock Exchange (BSE). The BEAM segment was created in 2018 to allow Bulgarian SMEs to get publicly listed under more simplified terms compared to the main BSE market. This means that it enables small and medium-sized companies in Bulgaria, start-ups, and scale-ups with good ideas and a clear plan on how to grow, to receive fresh capital. “Our Exchange was one of the first in the EU to receive approval for the organization of such an SME growth market at the end of 2018, but the real start of the market was in early 2021 with the first IPO by the producer of biometric security systems Biodit,” Manyu Moravenov shares.
Under the simplified terms of BEAM, companies are now allowed to raise up to €8M without the need to have their prospectus approved by the Financial Supervision Commission (FSC) neither for the initial public offering (IPO) nor for capital increase transactions for existing market participants.
“The Bulgarian Stock Exchange invested a lot of effort and time in structuring the market and its rules, as well as promoting it together with all market participants in recent years. There was also a need for some fine-tuning in the domestic legislation, such as those that allowed public offerings to a certain limit without the need for approval and publication of a prospectus. In addition, we are building the ecosystem step-by-step by having active communication with the local venture and private equity capital on the one side, and the institutional investors on the regulated market on the other side,” Moravenov highlights.
He explains that SMEs markets are quite attractive for smaller countries and smaller markets such as the Bulgarian one where more than 98% of all companies can be classified as SMEs. These markets make the exchange more accessible, cost-effective, and time-effective for smaller issuers. There are some BEAM analogs in the EU countries from Central and Southeastern Europe – examples are Poland, Greece, and Croatia.
“Last year we began to reap the fruits of our efforts. The great success and oversubscription of Biodit’s IPO was this catalyst, which showed the hesitant companies that the market works and the demand for new innovative and prospective companies is extremely high. That demand significantly exceeded the supply which led to serious oversubscriptions on most of the IPOs,” he adds.
BEAM as an alternative path to financing and investing
The main advantage of BEAM is that it reduces the administrative burden and listing costs for smaller companies, while at the same time they receive almost all the facilities that the traditional regulated market provides.
“The market is attractive for ambitious and innovative companies, which seek additional funding for their growth or financing a specific project. In fact, a company could plan the implementation of a project or expansion by raising capital in the specified amount within two or more 12-month periods. Companies can also benefit from the greater visibility of their products and services post listing, and expand their shareholders’ base,” the CEO of the Bulgarian Stock Exchange outlines.
The market also plays the role of an intermediary to the regulated market, and the transfer of companies listed on BEAM transfer takes place under lighter requirements.
“We are quite happy to have different use cases with the BEAM market– companies from various industries, incl. technology, organic food, real estate, and electric vehicle manufacturing. There are companies in different stages of their development – from very early stages to more mature ones, as well as different concepts for using the attracted capital,” Moravenov says.
From the investor perspective, transparency is one of the key advantages. BEAM trading is conducted on the same Deutsche Börse T7® trading platform and with the same trading model as the regulated market, and until 31.12.2025 capital gains realized on BEAM will be tax-free.
Make an IPO or Pitch?
As Moravenov explains, one of the important benefits of making an IPO on the BEAM market instead of going after VC financing is the opportunity to receive funding from a very wide base of institutional and individual investors under transparent conditions.
“In an environment of almost zero interest rates on deposits (for the time being) and increasing inflation, the BEAM market provides individuals and companies with alternative havens or profitability options. Due to the quality of the issuers, many of the IPOs on BEAM have enjoyed double and higher oversubscriptions, such as the public offerings of HR Capital (11 times) and Dronamics (4.5 times),” he adds.
An important advantage for current shareholders in raising capital through an IPO is also that they can decide what stake to sell to external investors to maintain control over strategic business development decisions.
This means that founders who choose to go on the BEAM market can provide an opportunity for an exit for some of their existing shareholders. In addition, ambitious companies see in their listing on the BSE an opportunity for quick and easy access to more developed markets through the so-called double or parallel listing. A case in point is the tech company Allterco, which is already double-listed on the Frankfurt Stock Exchange.
BEAM dynamics in 2022
Moravenov shares that expectations for the BEAM market for 2022 are optimistic although they are influenced by several external factors – the war in Ukraine and the sanctions against Russia, the increasing inflation, and the shift in monetary policies all over the world.
“We already have the first successful IPO in the current 2022, Webit Investment Network, which was 2.4 times oversubscribed. Several more IPOs are in the pipeline, as well as capital increases of companies already registered on the BEAM market,” he concludes.