Financing instruments

There are two distinct instruments available to entrepreneurs looking for financing their companies’ growth through the stock exchange – shares and bonds.

Shares

By issuing new shares and listing them on the stock exchange, an entrepreneur sells part of his company to the public, the stake depending on the amount of money the company needs as well as the percentage of the company he is comfortable selling. As opposed to bonds, when issuing shares, there is no debt that has to be repaid to the investors. Once listed on the stock exchange, the company can also benefit from other financial gains, such as using own shares as a collateral when accessing bank loans or as a currency to acquire competition (for more information about the benefits, see Listing Benefits.

Bucharest Stock Exchange operates two markets, both of them able to accommodate shares and bonds issuances. When it comes to issuing shares, Main Market targets more mature companies that have at least 3 years history of financial reporting, minimum EUR 1 million anticipated market capitalization and at least 25% free-float, meaning that at least 25% of shares must be in investors’ portfolio and freely transferable.

AeRO market on the other hand has more relaxed admission criteria, all in order to match the needs of the Small and Medium sized Enterprises, which do not yet fulfill the size or the length-of-operation criteria for listing on the Main Market. In order for a company to be listed on AeRO, it has to have an anticipated market value or equity of EUR 250,000 and a 10% free-float and at least 30 shareholders. In both cases a company has to transform to a joint-stock company (SA) prior to the listing.

Read more about issuing shares on the Main Market or on AeRO.

Bonds

Bonds on, the other hand, involve borrowing capital from investors, in exchange for periodical interest rate payments. Bonds are an attractive instrument to entrepreneurs as issuing them does not affect the ownership of the company or how the company is operated, while, at the same time, offering the company exposure and publicity granted by accessing financing through the stock exchange. The money borrowed from investors has to be repaid at maturity, or in tranches. The funds can also be rolled over through an issuance of new bonds, replacing the previous issuance. Alternatively, the bonds can be converted into shares at maturity, or even at certain given moments before it, thus reducing the amount of money to be paid to bonds holders at maturity (they are referred to as convertible bonds).

When it comes to issuing bonds, the list of requirements is much shorter and basically only covers the value of the bonds issuance. For the Main Market, the bonds have to be issued for at least EUR 200,000 however exceptions can be granted by the Romanian Financial Supervisory Authority (ASF). For AeRO, there is no minimum value of issuance imposed. It is important to remember however that in order to be issue bond, a company has to be a joint-stock (SA) company.

Read more about issuing bonds on the Main Market or on AeRO.