12 years later

When it comes to the functions of the stock exchange, it is usually stated that its technical functions are characteristic of every organized financial market. The stock market informs market participants about the essential characteristics of securities (price, trade volume, yield variability). The essence of the stock market is so-called price discovery, and the stock exchanges, like the banks, allow for the liquidity exchange between the surplus sectors and deficit sectors of the economy.

The role of the stock exchange and other financial market institutions (Securities Commission approves issues and keeps a register of issuers, and the Central Registry keeps registers of securities owners) in the ownership transformation and financial restructuring is in the second plan, and I dedicate these roles to this research.

At the end of 2005 Government of Republika of Srpska gave consent for the sale of shares in Banja Luka Brewery (hereinafter referred to as the brewery). That year, the loss was about 11 mil. KM, and the state-owned equity capital is sold for 53.8%. Already at the beginning of the second half of 2006, the new majority owner makes recapitalization (17.5 million shares), and the brewer in the eight-year period (2005-2012) achieves a cumulative loss in the amount of about 70 million KM. Since 2006 four issuances were made. In 2012 brewery, probably for the first time in its history, remains without capital (the loss exceeds the amount of capital), and the fate of its numerous creditors and stakeholders (banks, suppliers, workers, state) become utterly uncertain. Nevertheless, investors have increased their capital by the end of 2013 (16.6 million shares) and the share of capital in total liabilities increased from 0% to 33%. In the next four years (2014-2017), the brewer achieves an average net profit of about 6.3 million KM, and the end of 2017 capital is 41.1 mil. KM. Even 75% of the assets are financed from the capital i.e. own sources of financing.

In the background of financial restructuring through the financial market institutions, the ownership restructuring of the brewery (centralization and change of ownership) was also carried out. In September 2018 there are only three owners of the brewery, one natural person (0.002%) and two legal entities holding 99.9% of the capital. The brewery owns its own shares (87.87%), which makes the ownership structure very unusual for the local market, but not for the world financial market.

At this level of financial and ownership restructuring, the full operational and financial functions of the brewery is ensured. The claims of all creditors are backed by the assets of the brewery, its accumulation and an extremely high share of capital in the liabilities.

Whether the brewery will remain on the stock exchange or it will be transformed into a closed joint-stock company, depends on the decision of its majority owners.

The Stock Exchange (BLSE) and other securities market institutions (Securities Commission and the Central Registry) played theirs role – they provided institutional conditions for financial and ownership restructuring of Banja Luka Brewery a.d. Banja Luka.

I presented a school example of the functionality of financial market institutions. The next post on the topic of brewery could be dedicated to the shares valuation.