Government: First adoption of the plan for the "Simo Milošević" Institute, then purchase of shares

According to stock exchange rules, the Institute's shares can grow by a maximum of ten percent per day, so it will take another ten days for the price to reach 100 euros.

Small shareholders can get money if they vote for the Plan and recapitalization, but against the sale of assets

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New chance for adoption on January 21st: From the presentation of the restructuring plan, Photo: BORIS PEJOVIC
New chance for adoption on January 21st: From the presentation of the restructuring plan, Photo: BORIS PEJOVIC
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

The government will not buy shares of small shareholders of the Simo Milošević Institute on the stock exchange until the Restructuring Plan is adopted because it has received an opinion that this could be contrary to European Union rules on state aid and does not want to risk the entire rescue plan for this company because of it, the government unofficially told Vijesti.

The interlocutor of "Vijesti" said that the Government wants to achieve two-thirds ownership in this company through recapitalization, in which they hope that small shareholders will also participate, or by purchasing shares on the stock exchange after the Restructuring Plan is adopted.

A group of small shareholders of the Institute, gathered around the Montenegrin Association of Small Shareholders (CAMA), began offering their shares in the Institute yesterday at a price of 100 euros per share. By the end of the working day on the stock exchange yesterday, they had placed sell orders for 2.241 shares at 100 euros, which is about 0,6 percent of the total number of shares of the Institute. In the coming days, this offer could be significantly higher, because not everyone could reach their broker on the first day.

Institute in a stalemate

The state owns 56,4 percent of the shares of the Institute, the businessman's "Villa Oliva". Žarko Rakčević 27,4 percent, and other small shareholders, who are now gathering around CAMA, have a total of 16 percent of shares. The state lacks 10,2 percent of shares for two-thirds ownership and thus independent decision-making in connection with important decisions, such as the restructuring plan, recapitalization, sale of assets,...

This means that the Institute is currently in a stalemate, because if the Government sticks to its current position, small shareholders could only receive money for their shares after the adoption of the restructuring plan. “Vila Oliva” is now against the plan because it does not agree with the need to sell a large part of the Institute's assets and is also against the proposal for recapitalization because the state would be in a privileged position to more easily obtain three-thirds ownership and thus exclude small shareholders from decision-making.

Small shareholders stand to gain if they vote for the plan and against the sale

Small shareholders could receive money for shares if those who hold at least 10,2 percent of shares with the state voted for the adoption of the Plan and the recapitalization, and then voted against the decision to sell the Institute's assets at the new Shareholders' Meeting. Then, due to the vote against, there would be dissenting shareholders and the Institute would have to buy back their shares at the average market (stock exchange) price in the last six months. The stock exchange price has increased by 20 percent in the last 110 days. The Institute can only have this money if the recapitalization is carried out first.

The existing Restructuring Plan foresees that 106 million euros will be invested in the Institute in four years, of which 64 million through recapitalization, 28,2 million from the sale of part of the Institute's buildings, and 14,5 million from the loan that the company would take.

The institute now has total debts of 24 million euros, as well as an accumulated loss from the previous period of 29,5 million euros.

At the Shareholders' Meeting that began on January 9, there was no two-thirds majority for the existing Restructuring Plan, so the Government accepted the requests for its amendment requested by "Vila Oliva" and which will be amended in the plan by the continuation of the session on January 21. Rakčević requested that the first phase of the Institute not be sold and that the land complex near Tito's Villa not be converted into a building site for the construction of apartments and business premises, which the Government accepted.

The dispute arose over the decision to recapitalize the Institute by 23,5 million euros, as the Government offered a different decision before the session in order to achieve a two-thirds majority and exclude all small shareholders from deciding on the fate of the company. Rakčević then said that the state had proven to be a bad owner and was against receiving two-thirds of the shares, and proposed that he himself cover the Institute's debts of 23 million.

They bought shares for as much as 300 euros because they were deceived

Before submitting their sell orders to the stock exchange, the CAMA Association told "Vijesti" that it was possible to collect over 10 percent of the shares missing the two-thirds majority.

"The price at which the state will acquire shares through the planned recapitalization is over 50% higher than our offered price, at which the total value of the Institute is only 38 million euros, which is far less than the fair value of the Institute. We remind you, and as can be verified, minority shareholders have acquired shares over the past 20 years mostly in the range of 150 to 300 euros, which is the equivalent of the current 500 euros. Of course, on the stock exchange everyone bears individual responsibility for losses, but it is also objective to say that shareholders made investment decisions, as will later turn out, based on incorrect and misleading statements by state representatives at the time, and even regulatory authorities. We hope that bankruptcy will not occur, which would be the responsibility of the state and large shareholders, but in that scenario the expected value per share from the bankruptcy estate would be around 250 euros," CAMA told "Vijesti" at the time.

However, their strategy is now being undermined by the Government's decision not to purchase shares before the adoption of the restructuring plan, which is also an invitation to small shareholders to vote for the plan and the decision on recapitalization.

Rakčević: The Government's plan is to sell off the Institute

After their announcement, Rakčević told "Vijesti" that he would follow with interest the announced possible unification of shares of the state and another group of small shareholders in order to reach two-thirds ownership.

Rakčević was previously prevented from purchasing a portion of the Institute's shares from other small shareholders through a block trade.

"It is not good, it is not Brussels-like, to violate laws or prevent market and free price formation and trading in shares. Shareholders have the free will to sell or buy shares on the stock exchange at a price they think is realistic. I will follow with interest the legal action and the possible announced unification of the majority and minority shareholders who strongly and loudly opposed the privatization of the Institute. At the same time, they will ensure a two-thirds majority for the adoption of the Institute's restructuring plan, which will, as a first step, privatize - sell the Soliter, the Children's Department, the E Department and the main building of the first phase of the Institute. After that, the Institute will finally regain ownership of its land and then, in accordance with the restructuring plan, sell the land and build apartments behind Tito's villa and realize the investment of a mixed-use building or shopping center in the Institute's parking lot. All in the name of public interest, saving the Institute and health tourism. We will not support such a restructuring plan and 'saving the Institute'," Rakčević told "Vijesti" yesterday.

The aim of the plan is to enable the Government to legally assist this state-owned company in accordance with strict EU standards on state aid and is a prerequisite for the start of recapitalization. The authors of the plan believe that without its adoption, the Institute will go bankrupt, because it has accumulated losses of 30 million euros, and that it will cease to perform activities that are also of public importance.

After the restructuring is completed in 2029, according to the projections of the Plan's authors, the Institute's profit would amount to 4,9 million and would continue to grow, so that in ten years in 2034 it would be 6,6 million euros.

Rakčević previously said that it was not true that the plan and state aid were the only solution and offered that "Vila Oliva" cover the institute's total debts, and that the Institute, if the land is returned to its ownership, can take out a loan for the second part of the money needed for the rehabilitation. The government rejected this because "Vila Oliva" would increase its shareholding to 23 percent with a recapitalization of 41 million.

Shares rise by 20 percent in 114 days

After the Plan was made available to shareholders, the Institute's shares began to grow significantly on December 20. At that time, the share price was 18,2 euros, with very little interest in both buying and selling. Its shares are in the stock exchange segment where there is protection that they can grow by a maximum of ten percent per day. Since December 23, the Institute's shares have grown by 9,98 to 10 percent per day in eight business days, and yesterday their price was 38,99 euros. This growth of 110 percent in 20 days was achieved with a total trade in all transactions of 114 shares.

There are currently active orders on the stock exchange to sell 100 shares at a price of 58 euros, 2.241 shares at 100 euros, and nine shares at 154 euros. In order for the stock exchange price to reach 100 euros, according to the rules, it needs to grow by 10 percent per day for another ten days.

The rise in share prices will also lead to higher costs for paying out dissenting shareholders.

The nominal price of the Institute's shares is estimated at 154,93 euros, at which the recapitalization would be carried out. The highest historical value of the Institute's shares was during the so-called economic boom of 2007, when 7 shares were purchased on the stock exchange on May 192 at a price of 326,24 euros for 62 thousand euros, while they are now worth 7,5 thousand euros at stock exchange prices.

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