LPA sells one Ventspils Nafta share at RSE

RIGA - On April 28, the Latvian Privatization Agency issued 5 percent of shares in the oil company Ventspils Nafta to be auctioned at the Riga Stock Exchange. Of the 5,223,978 shares on offer, only one share was sold.

According to the news agency LETA , Janis Naglis, the general director of the LPA, said the sale of 5 percent of VN cannot be regarded as a failure because there was one share sold.

Naglis said the LPA board should review its directive to sell another 7 percent of VN shares by June.

In March, the LPA board decided the price of the 12 percent of VN shares to be auctioned at RSE would be set at the minimum share value of $3.28. The price of VN shares on the secondary market at RSE is $1.40.

Two LPA board members, Imants Mantins and Didzis Azanda, spoke out about this decision to sell VN shares at a fixed minimum price. Both board members after the auction said this difference between the fixed and the market worth of the VN share prices is the reason the auction failed.

Azanda said the LPA cannot fix a set minimum share price that is different from the price of shares are at RSE.

"To sell shares of VN at $3.28 was absolute nonsense. The price needs to be attractive to investors. If the shares started at $1.40, more interest in the shares would have been shown leading to a higher price per share," said Mantins. "I'm very happy I was right."

Azanda said it was a waste of time and funds to issue VN shares at a set price because as proven, there were no prospective buyers.

"VN shares can be bought on the secondary market for a much lower value than the fixed price set by the LPA," said Azanda. "The price of shares should be set by the market worth at RSE."

The RSE could not say why the auction of VN shares failed.

"The RSE is just a middle man between the government and the investor who invests in shares. I really cannot comment on government policies, but the market value of VN shares at the RSE is much lower than the minimum price set by the LPA," said Ilze Nagla, spokeswoman from the RSE. Naglis on the other hand said the sale of VN shares was economically justified, but not enough time was given by the Ministry of Economy to organize the auction of the shares.

"The sale of VN shares needs to be organized thoroughly and not rushed into," Naglis said earlier.

What is to be done with the VN shares has no answer.

"The new Latvian government coalition needs to decide how to operate further concerning the VN shares and give the LPA their recommendation," said Mantins.

There are a few options the government and the LPA can consider. One is to go ahead with the 7 percent share sale at the RSE or sell the shares on the international market. Another is to drop the minimum share price. Naglis said there is no reason to reduce the price with no offers for the first auction.

Naglis is considering the proposition of canceling the sale and putting unsold shares back in government hands.

The LPA board and council are holding a meeting May 12 to consider how to proceed with the VN shares to be auctioned. "I hope a sensible agreement will be reached. If a judgment to sell the shares again at above market value, the auction will result in another failure," said Mantins.