Shares of Digi Communications drop as CEO of Romanian subsidiary is investigated for corruption

Shares of Digi Communications drop as CEO of Romanian subsidiary is investigated for corruption
By bne IntelliNews May 17, 2017

Shares in Digi Communications closed the day 4.1% down at RON39.5 (€0.86) per share on the Bucharest Stock Exchange on May 17, the day after they were floated.

The company was hit by a corruption scandal while it was carrying out the IPO on the Bucharest bourse as Romania's National Anticorruption Directorate (DNA) started a criminal investigation into the CEO of the company's subsidiary RCS&RDS. The company gave investors two days to withdraw their offers, but while this was most likely the reason for the price of the IPO - to the lower end of the band announced in the IPO prospectus - demand among retain investors was still strong. 

The 21.7% share IPO of Digi Communications was completed at the price of RON40 (€8.78), the deal intermediaries informed institutional investors on May 10.

On May 16, the CEO of RCS&RDS, Serghei Bulgac, was officially informed by the DNA that he is now being investigated on suspicion of money laundering.

The DNA announced on May 5 it had started an investigation into several current and former members of the management team of RCS&RDS and the former head of the Romanian Professional Football League (LPF), Dumitru Dragomir, on suspicion of corruption. On May 8, RCS&RDS announced that it had received an official notification from the DNA that it is also a suspect in the ongoing investigation for the same offences.

Digi Communications had warned prospective buyers in its IPO prospectus of the risks stemming from anti-corruption investigations and warned that if found to have violated anti-corruption laws, this would have an adverse effect on the business.

"The company continues to fully cooperate with the investigation and believes that RCS & RDS SA, as well as individuals named as suspects in the investigation have acted appropriately and in compliance with the law. The company does not currently expect the investigation to interfere with its daily operations in any material manner," Digi Communications said in a statement.

The company’s principal shareholder is Zoltan Teszari who owns 56.93% of the company directly and indirectly.

Digi Communicationms is a leading provider of telecommunication services in Romania and Hungary offering cable and DTH television services, fixed internet and data and fixed-line telephony.

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