Warsaw’s stock market aims to make a comeback after “lost” years.

The new head of the Warsaw Stock Exchange is optimistic that his bourse can recover from a lost decade in which it failed to keep up with Poland’s booming economy.

Last year, the total capitalization of Warsaw-listed companies fell to 22 percent of Poland’s GDP, compared to 35 percent in 2013. This came as fresh initial public offerings dwindled – Polish storage company parcel InPost opted to float in Amsterdam in 2021. , raising 2.8 billion euros — and trading volumes in Europe fell.

Over the same period, Poland’s economy outperformed its main European peers, most recently with stronger-than-expected GDP growth of 3.2 percent in the second quarter from a year earlier.

The stock market’s decline in prominence among investors and companies is a significant drop from a decade ago, when the exchange looked poised to dominate Central and Eastern Europe and held merger talks with its older counterpart in Vienna.

“Unfortunately, our stock market has not kept up with the growth of our economy,” Tomasz Bardziłowski, chief executive of the Warsaw Stock Exchange, said in an interview.

Tasked with reinvigorating the Warsaw stock market, Bardziłowski was appointed in February by Prime Minister Donald Tusk’s coalition government, two months after Tusk ousted the right-wing Law and Justice (PiS) party.

Bardziłowski sees reasons for optimism, for example, with Tusk replacing the management of Warsaw-listed state-controlled companies, notably oil and gas group Orlen, whose share price has fallen 30 percent over the past five years.

In February, a state audit accused Orlen of selling assets for $1.24 billion below their value to complete an internal merger that cemented Orlen’s position as Poland’s dominant energy company. Last year, one of its most prominent foreign investors, Norway’s sovereign wealth fund, warned that Orlen’s purchase of a Polish media business could have “implications for press freedom” in Poland because it was seen as mandated by the PiS government.

Without specifically discussing Orlen, Bardziłowski said “foreign investors were less attracted to our stock market and lost some confidence, especially due to concerns about the governance of some state-owned companies.”

Bardziłowski said he was also encouraged by recent media reports that Studenac, a Croatian food retailer, is considering a dual listing in Warsaw and Zagreb, while private equity firm CVC is expected to and introduces Polish retailer Jabka to Warsaw. With the value of its convenience stores estimated at $8 billion, Jabka would be one of the largest initial public offerings in Europe this year.

“Once you have a couple of big IPOs, it creates momentum, and I think there will be more of a queue after that,” Bardziłowski said.

However, delistings have recently outpaced new listings in Warsaw, partly reflecting the growing influence of private equity firms. While working on Jabka’s IPO, CVC separately offered in July to buy and spin off Comarch in a deal struck with Comarch’s founding family shareholders that valued one of Poland’s leading software companies at 650 millions of dollars.

Some of the stock market’s problems were not of its own making, such as an outflow of money prompted by a Polish pension reform – dating back to 2013 under a previous Tusk government – ​​that forced pension funds to reduce their equity investments own.

But some business owners who shored up their businesses in the 1990s after the fall of Poland’s communist regime are also scathing about the recent regulations.

Krzysztof Borusowski, chairman of Best, a debt collection company that started operating in 1997, accuses regulators of adding red tape that has discouraged companies from listing, rather than encouraging investors by focusing on better regulatory issues. such as insider trading.

“We completely lost our momentum,” he said. “Our market is now over-regulated, but with an emphasis on the unimportant.”

Fixing the situation “really requires a robust debate about the purpose of the Warsaw Stock Exchange,” he added.

In the debate, Bardziłowski called for “more fiscal incentives,” including a reduction in capital gains taxes for long-term investments.

He pledged to launch a long-awaited electronic trading platform before the end of 2025, a year late. Bardziłowski also hopes Warsaw will start listing real estate investment trusts next year.

“We lost several years in Poland, without a clear strategy on how to attract our own companies and nothing that would make foreign capital want to invest here,” said Jarosław Grzywiński, who had a short tenure as the exchange’s chief executive Warsaw in 2017. “If you had a good company with a scalable business, it became normal to look abroad for a more liquid market, as InPost did with its IPO.”

Even though some observers remain skeptical of a quick return to Warsaw, most welcome Tusk’s appointment of a CEO who previously worked in equities rather than public administration. Bardziłowski started as a stock analyst and then managed various brokerage firms.

“You cannot act as if you are part of the state administration, you just wait for the customers, you have to be proactive, which was not very well understood, not only in the last eight years (of PiS government), but more,” said Jerzy Kwieciński, who was finance minister under PiS. “I’m hopeful because this guy Tomasz comes from the capital markets and understands this.”

Eva Sudol, who teaches finance at Harvard Business School, said that Warsaw faced a very difficult challenge to get out of the “chicken and egg” situation of the last decade: “When there is not enough capital, valuations are low and in new companies don’t want to come in.”

The Warsaw Stock Exchange needs better marketing, regulation and possibly tax incentives to attract investors, but ironically, an improvement could also make Warsaw a takeover target, Sudol said. “I think Euronext would like to eventually buy the Warsaw Stock Exchange.”