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Cablegate: Warsaw Stock Exchange Creates New Smaller Exchange

VZCZCXRO7097
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHWR #1743 2221203
ZNR UUUUU ZZH
R 101203Z AUG 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 4951
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 1781
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS WARSAW 001743

SIPDIS

SIPDIS

DEPT FOR EUR/NCE, EUR/ERA, EEB
EUR/NCE FOR BPUTNEY
COMMERCE FOR 4232/ITA/MAC/EUR/JBURGESS, JKIMBALL, MRODGERS
TREASURY FOR MGAERTNER

E.O. 12958: N/A
TAGS: ECON EINV ETRD PL

SUBJECT: WARSAW STOCK EXCHANGE CREATES NEW SMALLER EXCHANGE

REF: WARSAW 1723

1. Summary. The Warsaw Stock Exchange's (WSE's) new trading
platform NewConnect will be launched on August 30, 2007. NewConnect
will be dedicated to Small and Medium Enterprises (SMEs) with high
growth potential. The new exchange has less restrictive listing and
capitalization requirements. The WSE hopes that companies initially
listed on NewConnect will grow and eventually move up to the WSE.
End Summary.

---------------------------
NewConnect Debuts August 30
---------------------------

2. The WSE will launch a new trading platform, NewConnect, parallel
to its main trading floor on August 30, 2007. The new market
platform is geared towards and will finance the development of young
and dynamic companies, mostly SMEs, with high growth prospects.
Potentially, NewConnect will provide investors with a high return on
investment for their willingness to accept the higher risk level
associated with such SMEs. WSE representatives expect that venture
capital and private equity funds, asset management funds and wealthy
and high risk accepting individuals will invest in this alternative
trading market.

-------------------------
Easier Entry Requirements
-------------------------

3. According to WSE President Sobolewski, a group of Authorized
Advisors will prepare the issue for an IPO on NewConnect and will
act in a supporting and advisory capacity to the new firm for at
least the first year of the listing. The listing process on
NewConnect will take place via a private offering. The procedure
will be shorter, easier and cheaper than a regular IPO on the WSE.
The trading session on the new market will be shorter than the
regular WSE session due to potentially smaller liquidity as well as
much higher market risk. The trading day will start at 930 AM and
end at 200 PM. The main stock exchange will provide regulatory over
sight to its new offspring.

-------------------------------------------
Goal to Grow Companies so they can Join WSE
-------------------------------------------

4. NewConnect is designed to host firms valued at around 20 million
zloty ($7.4 million) with a value of their public offering between a
few hundred thousand and few million zloty. The plan is that the
most successful companies will eventually move to the main floor.
By the end of the year, WSE President Sobolewski expects more than a
dozen listings on NewConnect and a few hundred in a couple of years.
In the long term, he hopes that small companies debuting on the WSE
will provide more capital to the exchange. At the end of 2006,
WSE's capitalization to GDP ration was 46%, much lower than that of
any major stock exchange in western countries. Sobolewski believes
that "WSE has a long way to go if it wants to catch up" with its
western counterparts where the capitalization ratio often exceeds
100% -- thus the stock market's capitalization is higher than the
country's GDP.

5. Digital Avenue and S4E (storage4Enterprise), two hi-tech
companies owned by the MCI Management investment fund, will be the
first firms to debut on NewConnect. WSE representatives expect that
the majority of firms that will be represented on New Connect will
be from the technology sector, but WSE also sees room for companies
operating in other sectors of the economy.

6. Comment: NewConnect, which in some ways follows the example of
the London AIM, should fill a hole in Poland's capital markets by
providing an easier way to list new companies. Despite the WSE's
insatiable appetite for new listings, some Polish companies are just
not large and rich enough to meet the Exchange's requirements. The
Advisors, if appropriately chosen, should also be instrumental in
ensuring that the new listed companies reach their growth potential.
The new platform is an innovative idea of the WSE to attract the
wave of capital looking for interesting investment vehicles in
Poland's buoyant economy.
Hillas

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