Telekomas stock floats, for better or worse

Jun 15, 2000
By Peter J. Mladineo

That's not to mention the usual spattering of outrage by those
critical of the Lithuanian government's spotty privatization record.

On June 10, the Lithuanian government announced that it was
reducing the share of the company's stock it was selling from 35
percent to 25 percent, citing low prices and low demand for telecom
stock. The Lithuanian government decided to sell 203.7 million
shares, and will retain the ten percent stake, totalling 81.8 million
shares, for an indefinite period.

State Property Fund general director Stasys Vaitkevicius told
reporters, "We will keep 10 percent for the future for better times.
Most probably, a public offering will be announced, but it will
happen in a year or two."

Audrius Baciulis, spokesman for Prime Minister Andrius Kubilius,
offered some hope that the additional stake could hit the markets
earlier if market conditions improved.

"Maybe after some months, for example, if the price of Telekomas
shares jumps," he said.

The advisers to the government, the German/UK concern Dresdner
Kleinwort Benson and the Austrian firm CAIB Investmentbank, issued
a statement saying the flotation was a "success." Shares and global
depository receipts will be traded on the National Stock Exchange of
Lithuania (NSEL), the Latvian and Estonian bourses, and the London
Securities Exchange.

Shares in Lietuvos Telekomas were added to the blue-chip list of the
NSEL. In the first day of trading, June 12, a special session for
Lietuvos Telekomas shares was set up, in which 220,650 shares were
purchased and the price of Telekomas stock stood at 3.25 litas.

Lietuvos Telekomas was also listed on the Baltic List, adding its
relatively large market capitalization of 657.99 million euros.
Lietuvos Telekomas has the second largest market capitalization on
the list, behind Eesti Telekom with a capitalization of 1,009.74
million euros.

Surprisingly, a lower than expected share price - 3.15 litas ($0.79)
and $7.875 for global depository receipts - was set. Initially, it
was thought the price could be as high as 3.80 litas per share.

"It's an artificially set price," said Giedrius Steponkus of the
Vilnius-based Jungtine Makleriu Kontora (United Brokerage Company).
"All things that are made artificially on the market are profitable
only for a few participants on the market. Whoever is creating the
rules of the game is winning."

The problem, some Lithuanian dailies reported, was that demand in
London was only exceeding supply for shares priced at 3 litas per
share. Anything more expensive wasn't desirable to international
investors.

The harshest criticism came from economist Margarita Starkeviciute,
who last week urged the international public to avoid Dresdner
Kleinwort and CAIB Investmentbank because of what she termed
"unprofessional" conduct.

"Lithuania looked like a pauper, which begged through her high
officials and even ministers in London to buy its property at any
price," she said.

Starkeviciute, who has been accused in the past as being naive about
global offerings, also said that the government should have postponed
the IPO for a year, when market conditions would be better. This was
in contradiction of her comments last week, when Starkeviciute said
that it was too late to postpone the IPO.

Baciulis took umbrage at Starkeviciute's recommendations.

"It seems very interesting how Ms. Starkeviciute could be so sure
that the price range after one year will be higher than today. Why
not lower?" Baciulis said.

For investors those may not be the most encouraging words, but
Baciulis, using wording similar to a statement by Finance Minister
Vytautas Dudenas, waived responsibility for the vicissitudes of a
modern stock market.

"The market is the market," Baciulis said. "You can't predict the
price. A couple of months ago the price of all telecoms in Europe was
rising quite quickly. Then in March the prices fell down. Why?
There's no answer. Maybe after some time the prices on telecom stocks
will jump once more. At this moment you must watch the market closely
and don't be afraid to make a decision."

Government officials denied recent reports in Lithuanian dailies
saying that demand for Telekomas stock was five times higher than
supply. Baciulis called this a "very strange message."

"Demand is exceeding supply in a much lower price range. The demand
is exceeding supply for 3 litas a share," Baciulis said. However, one
stockbroker who spoke on condition of anonymity said that the
government's claims about volatile international markets were
spurious. He blamed the low demand on poor marketing in the west, and
even went so far as to call the handling of this IPO by the
government and its privatization advisers "shitty."

And, Privatization Commission Chairman Eduardas Vilkas was quoted in
papers saying that the flotation was "not very successful."

"We did not expect it to end that way," Vilkas was quoted as saying.

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