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Taking stock: Marek Dietl

Marek Dietl, CEO of the Warsaw Stock Exchange (WSE), speaks with Acuris Capital Intelligence about the challenges that lie ahead, from inflation to cryptocurrency and how these will affect WSE’s growth ambitions and M&A plans.

Interview by Joanna Socha

Q. How is Poland's current high inflation rate shaping the public market?

The eurozone has a significant problem as inflation rates vary across countries, despite having one interest rate. In Poland, we have one inflation rate and one interest rate. The interest rates are going up, but real interest rates remain negative. This is why the stock market is still a better way to protect savings against inflation than bank deposits or bonds.

As interest rates are changing, the situation may change but, for now, we haven't seen a strong negative influence on our market. Generally, a moderate inflation rate in low single digits positively impacts B2B companies because they can proceed with price adjustments.

A higher inflation rate, between 8% and 12%, might be more troubling as uncertainty increases and this is the key parameter when making investment decisions. If price and exchange rate uncertainty grows, the willingness to invest will decrease. In the mid-term, corporations may be less willing to raise capital because they have lower cap needs if they don't invest.

Q. How are you preparing for such a scenario? 

As a company, we have a very strong cash position, so we're mainly worrying about whether banks will make us pay for staying liquid, as we have such a conservative investment policy. 

As a capital market, we believe in the interest rate growth scenario. That's why, together with our commercial partners, we are launching an exchange traded fund based on the TBSP index, a treasury bond index. We believe there will be interest in such a portfolio, both for long and short investing.

Q. What other major challenges will the WSE face in 2022?

When it comes to the stock market, the biggest challenge is sustaining the interest of issuers. We had a strong year for IPOs, but it's not like we’ve got a lifetime subscription; we need to work on it all the time and attract new ones.

We are also working on our crowdfunding platform. The new regulations from the European Securities and Markets Authority allow us to launch a crowdfunding platform for smaller players. However, we cannot just wait for the companies to come to us; we need to actively search for smaller and larger candidates. Launching this platform is a big regulatory change for us, as we would be operating not just as a listing platform but also as a broker.

Q. What is the organisation’s acquisition strategy in 2022 and beyond? 

Buying and selling companies is not simply maths—there is a lot of psychology, as well as emotions and accounting. But we have the money and we are willing to acquire a player from Western Europe in order to gain new competencies and learn to compete in the most challenging markets. For now, the zero interest rates in the eurozone make company valuations gigantic, so we hope there will be a correction that will provide us with interesting investment opportunities.

Q. WSE saw several high-profile IPOs in the past two years. For example, Allegro was the largest IPO in the history of the Polish stock exchange, but their stock declined significantly over time. Other players saw significant drops after an initial success. How do you think these events will impact the interest of companies that consider listing?

The biggest challenge for stock exchanges, globally, is to satisfy the issuers, on the one hand, which means giving them access to cheap capital, and on the other hand to give investors an opportunity to make money.

The problem you're describing is global. There has been a growth in VC and PE funds that invest in companies at the very moment of their steep growth. When they finally list, their growth flattens out. I believe that some companies go public too late and there is not enough room for investors. We are not a broker, so we don't have control over that.

Still, my advice to investors would be to choose your portfolio companies carefully. And for issuers, be smart when selecting your investors—after all, there are investors who buy into hot IPOs and then sell them right away. When you plan an IPO, it's important to check whether you have long-term investors or just those interested in hot money.

Q. How do you deal with potential competition from things like cryptocurrency?

We are very open to new structured products based on cryptocurrency valuations. We think that a renowned provider of such a product could find a place in our organisation. We have started to provide quotations of our companies in different currencies and we are considering whether we should also present them in cryptocurrency.

We believe in distributed ledgers and that's why we will develop our private market in this technology. For example, we are launching a trading platform that will not require use of a brokerage house, a platform that enables token trading.

A bit of background: The Warsaw Stock Exchange is the biggest securities exchange in Central and Eastern Europe and operates a regulated market of shares and derivative instruments as well as an alternative stock market, NewConnect, for growing companies. Dr Marek Dietl is the CEO of the Warsaw Stock Exchange and an economic adviser to the President of Poland. He has spent almost 20 years in the consulting and venture capital industries.