Poland has never seen such a stock market debut. Two weeks ago, the Allegro e-commerce group started on the Warsaw Stock Exchange as part of the largest IPO in the Central European nation. It suddenly became Poland's largest publicly traded company.
At the end of the first day of trading, Allegro's market capitalization had risen 63 percent. Overall, it has doubled since its debut, and the country has a $ 20 billion company.
The success of Allegro's initial public offering is an endorsement of the company offering investors both the acceleration in the growth of online shopping caused by the pandemic and Poland's growing middle class. But it also has broader meaning for the country's capital markets, adding a digital shine to an exchange better known for cumbersome state-controlled companies that focus on sectors like finance and energy.
As recently as April, PKO BP, a state-controlled bank, was the largest company in the Warsaw blue-chip index, the WIG 20. The two largest companies are Allegro, which is worth more than twice as much as any other member of the index, and CD Projekt, the game maker behind the successful Witcher video games. The latter's stock price has risen as Cyberpunk 2077, one of the hottest-anticipated launches of 2020, gets the finishing touches.
More good news could come. Canal + Polska, the pay-TV platform, announced last week that a listing was planned in Warsaw. HUUUGE, a mobile game maker, and online clothing company Answear.com are also aiming for listings, underscoring the country's growing reputation as a European technology hub. Traders and investors are hoping that an exchange that has lost more companies than it has gained in the past three years will gradually recover.
That would be good news for foreign investors. Before the coronavirus, Poland had one of the fastest growing economies in the EU. Much of the fundamentals that drove this growth, such as the growing middle class, inflows of EU funds and low interest rates, are likely to continue beyond the pandemic. But since 2010 the WIG 20 has lost a third of its value. This has not given investors a taste of Poland's success.
One of Prime Minister Mateusz Morawiecki's favorite refrains is that “capital has a nationality”.
There are two reasons to be careful. For Allegro itself, the question is whether Amazon, the global e-commerce hegemon, will decide to build muscle on its home turf. The US company currently serves Polish customers via a Polish-language version of its German website.
But it has invested in the logistics infrastructure in Poland and is expected to prepare for a more concerted push east. If this were the case, the multiple of Allegro could gradually appear stretched: The company value in the next 12 months will already be 21.5 times the expected sales, more than five times the comparable value for Amazon.
The wider concern of foreign investors, however, is that the success of Allegro and CD Projekt does nothing to change the fact that the Polish government remains deeply ambivalent about foreign capital. One of the favorite refrains of Prime Minister Mateusz Morawiecki, who was an executive of the Polish unit of Spanish lender Santander before entering politics, is that "capital has a nationality".
This is especially true in the media sector, where MPs from the ruling Law and Justice Party have often raised the prospect of a reduction in foreign property. Some even advocate laws that would force foreign media groups to sell shares that exceed a certain threshold.
Even if the government does not take such drastic measures, there are other ways it can reduce foreign media ownership. Earlier this month media reported that the German media group Verlagsgruppe Passauthe was in talks to buy the Polska Press arm of the state-owned refinery group PKN Orlen, which controls a number of regional newspapers.
When the news broke, the country's minister of culture said state-controlled companies should "buy up" media groups, but insisted that changes be made to the Polish media market in a "civilized way".
No matter how "civilized" the transaction is, oil refining and local journalism are not obvious bedfellows. It is also not clear whether a shareholder investing in the energy sector wants to diversify their portfolio in the manner instructed by the Polish government. Currently, the government appears to be limiting its crafting to sectors it deems strategic. The problem is that in Poland what is considered strategic can always change.