This Thursday, Estonian state-owned energy group Eesti Energia announced plans for a voluntary takeover bid to Enefit Green's minority shareholders in order to bring the subsidiary fully back under its ownership.

Speaking to ERR, Aare Tammemäe said that from an investor's perspective, this is not a good decision. Given how few large companies are listed on the Baltic Stock Exchange and how few new, more actively traded and liquid public stocks have been added in recent years, the capital market will certainly suffer from yet another company leaving the exchange.

"Enefit Green is definitely one of the Baltics' public stocks, and considering the number of investors and its market value, this is not a good decision from an investor's point of view," he said. "I suspect that even from the company's own perspective, this will limit its ability to raise additional equity through the capital market."

Tammemäe pointed out that after delisting, capital sources would primarily be shareholder cash injections and loans or bonds.

"The fact that the company's stock price is currently low due to market conditions reflects the nature of the market itself," he explained. "Investors themselves assess and determine what they believe the company's value to be. Don't let yourself be fooled by short-term emotions and market views. Again, perhaps this decision was poorly justified, but from an investor's perspective, it's not good news."

Enefit Green's stock price has been low, but according to the investment banker, such market movements serve as signals to company management to take action — and that signal may not necessarily be a bad one.

"If shareholders currently see the company's value as being low, that presents an opportunity for management to take action to increase that value," he noted.

"Enefit Green has a very clear and focused business area," he continued. "Investments in green energy are, in the big picture, a highly defined focus area, and investors can also assess it that much more easily than Enefit's operations as part of a large conglomerate with a broad range of activities."

Tammemäe noted that Enefit Green has stood out well on the market compared to, for example, Lithuania's Ignitis, which operates in multiple business areas, often making it difficult to understand how the company is performing across its various segments.

He does not believe that delisting a company that was taken public just four years ago would send investors a negative signal about the local investment climate. He pointed out that in a free market, owners always have the right to list or delist a company.

"Rather, I'd say that the decision to list the company was a positive and successful stock market debut," the Redgate Capital partner recalled. "The stock price dynamics and the achievement of its status as a public stock demonstrated that the company was very well received by the market. Whether the company should have adjusted its investment strategy, strategic choices or geographical focus in the meantime is another matter — but that has nothing to do with whether or not the company is listed."

He added that the state should continue making decisions to take companies public. Listing Enefit Green allowed it to raise additional capital and build a sort of fanbase among the investors who supported it, and according to Tammemäe, such investors would welcome new public stocks on the market.

"Many will certainly disappointed or frustrated over this, but I don't believe it will fundamentally shake investor confidence," Tammemäe said. "There are plenty of goods available at the market, and if one seller decides to pack up their goods, there will certainly be another. Money won't go uninvested. It's just sad that some of this money might move out of the Baltics due to the lack of investment opportunities here. And that is why the state should continue its policy of keeping state-owned companies listed on the stock exchange — not pulling back."

He added that state-owned companies being listed also improves their management quality, provides greater focus and allows investors to channel capital into the local economy via capital markets.

Neivelt praises Eesti Energia's decision

Businessman Indrek Neivelt, meanwhile, wrote on social media that he himself had also bought shares in Enefit Green when the company went public four years ago, but in recent years, as he has delved deeper into energy issues, he has come to realize that this patriotic decision was not a financially sound one.

"Wind energy's capacity factor is at best one-third, meaning that for most of the time, the company cannot sell the electricity it produces," Neivelt wrote. "But customers don't want to deal with a company that can only supply them with electricity a third of the time — and even then, only when there is wind. To have customers, the company would have to buy electricity from the market the rest of the time, but that also comes with risks."

He added that, of course it makes more sense for an electricity producer to have generation capacity available at all times. He believes Eesti Energia's decision to delist Enefit Green is a perfectly logical step.

As part of a voluntary takeover bid announced Thursday, Eesti Energia plans to offer Enefit Green shareholders the opportunity to sell their shares at a price of €3.40 per share. This offer price is 47 percent higher than the March 26 closing price and 27 percent higher than the average trading price over the past three months.

The voluntary takeover bid is set to begin on April 8 and run through May 12. If the offer is successfully completed, Eesti Energia will pay for the shares on May 16.

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