The revival of the capital market, appearance of new companies on the market, and a solution for the problem of generation change are expected by the CEOs of the Nominated Advisers. Ferenc Virág, CEO of Random Capital, and Zoltán Jutasi, CEO of Navigator Investments gave interview to us about their cooperation.

The fact that the local businesses established in the beginning of the ’90s are now facing the issue of generation change might cause some serious problems on the level of the national economy. A new, innovative solution would enable these companies to go public. Recently Random Capital and Navigator Investments together became Nominated Advisers of the Budapest Stock Exchange, which gives them the exclusive right to facilitate the IPO of these companies on the newly founded market of the BSE called Xtend.


It could be heard from many companies in the past two decades that they might want to issue shares on the stock market, but at the end only a negligible number went to public. How this new opportunity is different? What motivated you to run for becoming Nominated Advisers?

Ferenc Virág: I see a huge opportunity in the Xtend market, especially due to its complex supporting system as well as in the existing demand from investors. This construction is much simpler and cheaper than in case of the BSE Premium or Standard categories; moreover it is also safe because of the involvement of the Nominated Advisers. On the one hand, huge funds are available for the companies at the National Stock Exchange Development Fund. On the other hand, the Budapest Stock Exchange can achieve significant decrease in the costs of IPO. In my opinion these arguments might convince a lot of companies about the advantages of the stock exchange. And it also serves as a good business opportunity for brokerage companies.

Zoltán Jutasi: Several companies face the problem of generation change recently. International trends show that only 30% of first generational companies are able to successfully undertake succession. The future of the rest of the businesses depends on whether they are able to sell the company. We got in touch with several companies for which IPO would be a suitable solution. The timing of introducing Xtend for the SMEs was just right in this sense, and it is important for us to expand our activities to this direction.


The public procurement of the BSE would have allowed you to win the status on your own, but you still decided to cooperate. Why?

Ferenc Virág: Although it is true that Random Capital fulfilled the requirements on its own but launching a new business activity like this would require expanding our human workforce. Setting up a new corporate financing team is time consuming and requires significant investment. We chose to cooperate with an advisory company that has good references in the field, and Navigator fulfilled our requirements in all aspects, and we also have a good relationship with the management of the company.

Zoltán Jutasi: The team of Navigator has the necessary expertise and experience for preparing an initial public offering, but for providing support for the public offering and trading on the secondary market we need an investment provider, that’s why we were looking for the partnership.

Together the two companies can not only offer a full range of services but can also continue a more active sales activity in order to search for the potential companies. As Ferenc mentioned, we are stronger together.


Random Capital practically only focused on its online brokerage services and serving the investors cost efficiently. The Nominated Adviser, on the contrary, focuses on the supply side, on companies that want to go public. This requires significant human capital, which works with a completely different business model than the areas of activity of Random Capital. What this sharp turn is due to?

F. V.: Indeed, it is a milestone in the life of the company. This is the first step towards becoming a full-service provider. We successfully managed to become a significant player on the retail broker market as an independent investment service provider, without any banking background. Today Random Capital possesses one of the biggest and most active investment background on the BSE. With this step, Random Capital is providing high quality services to the potential issuers.

A kis cégeknek is érdemes tőzsdére menni: még soha nem volt ilyen egyszerű

Our activity always focused on the Hungarian capital market because we believe in the development of the local stock exchange. It’s obvious that for that many issuers and new good stories are needed, they are only possible with our help. Investors look for new opportunities, thus, if we succeed, it will be beneficial not just for us, but for the existing and future investors, and for the whole Hungarian capital market as well.


Nowadays there is a fierce competition among the different financing forms for sturtups. The government also put aside tens of billions of HUF for this purpose. How the companies can be convinced to undertake the costs of being publicly traded while they have so many opportunities and capital available?

F. V.: Indeed, huge resources are available on the startup market, and there is an intense competition for the best companies. The chances of Xtend and the stock exchange are dependent upon how strict the requirements will be for acquiring capital from the National Stock Exchange Development Fund. If the requirements will be similar to that of the other national venture capital funds, then the BSE will have a hard time attracting companies. If the criteria will be looser, then there will be a good chance for that, as going public on Xtend is about more than just acquiring resources. It is an opportunity where publicly traded companies can more easily and flexibly acquire further capital later on.

Z. J.: It is important to point out that our primary targets aren’t the startups. We approach this opportunity from a different angle and focus on a segment which is in a different business life cycle phase. These are few-decades-old small- or medium-sized companies with stable revenue, and mainly under the control of the family, and currently are facing the issue of generation change. For them the Stock Exchange Development Fund is not an option because in most cases these stories are not about growth. However, the Xtend market can provide a solution for them.


The Xtend market exists for half a year now, and more companies are Nominated Advisers since the beginning, yet zero IPO have taken place so far. Isn’t this make you uncertain? Why do you think it is a viable concept?

F. V.: We shouldn’t make conclusions based on the past few months. Mainly because although the market has been launched formally, but the funding system attached to it is only partly available. As every player on the market knows about it, their strategy to wait and see is a rational response. This is one reason why we weren’t in a rush to acquire the Nominated Adviser status, and we wanted to see what tools we get to work with.

We see quite clearly how the model looks like, and I can state with certainty that many companies will take the opportunities.

Z. J.: We provide a solution for the companies in which they not only benefit from the advantages of IPO, but they also can have a vision for the future and the transfer of the family fortune. Generation change and succession are very complex issues even in such simple cases when the retiring founder-owner can hand over the company to a properly trained successor. Moreover, in most cases this is not the case. In these situations, the partial or full exit of the owner is always in the equation, which means the sale of his or her share of ownership. During the past few years I worked with several retiring owner to sell the company. It is a very difficult task to harmonize the business and the emotions in the transaction.

Think about it. In the past 20-30 years many owners have started thinking about their business as it were their child. I also experienced it when I sold my first company. The difference here is that it also has to be planned together with the owners that what they will do with the plenty of free time after selling the company.

Although it sounds weird, they don’t sell the company primarily for the money. Suddenly they become time millionaires, and we have to do something about it. We focus on addressing these people with our new construction. We think that they are the most interested in this new approach.


Indeed, many companies face this issue, but what solution can you offer for this situation?

Z. J.: Usually the barrier for the founder-owner to exit that there is no professional background or the potential buyers lack the capital; a typical example for this is when the employees want to carry on operating the business. In these cases, the capital market can be a viable option, because financial investors can be involved helping the old owner to exit. However, it can only work if the investors make sure that the transfer of control happens without any complications. By taking the company to the stock exchange, we need to undertake changes in the organizational structure and corporate governance of the company.

As a publicly traded company, a board of directors and/or supervisory board has to be set up, in which those managers can get seats who can take over both the professional and financial operation of the company is the long-term. Simultaneously, the presence of the company on the stock exchange makes it possible for the owner to exit gradually or at a later date during a bigger transaction. Our service package includes the planning and execution of the succession strategy, and interim management when needed, and coaching services. We also provide solutions for how the retiring owner can utilize his or her experiences in case he or she wishes to remain active in the business life.


On the BSE’s traditional market may smaller companies can be found, though they are not very active. Are you sure that the SME sector is the future of the stock market? Will they be able to finance the market in the long-term?

F. V.: Although on the news usually the blue chip shares are in the centre of attention, but the capital market is not only about them. If we want to put it simply, we can think about that every blue chip company started as a small company. Of course, primarily I’m not thinking about MOL or OTP, because they went through a very different path. But we can think of the well-known story of Apple or Microsoft. The blue chip companies of the future (in 5-10-20 years) may struggle with the issues of foundation at the moment. Although very few succeeds in becoming a large company, but that is why we have to attract as many small companies as possible, because then there will be a higher chance for some of them to grow big and they can finance the market by themselves. It’s obvious that in the short-term, neither the volume nor the liquidity of the market will change significantly with the appearance of the SMEs. It is rather a long-term investment, but we believe that this is the right path. It has to be accepted that the Hungarian economy is not able to recreate the MOL or OTP story, and there is no point in waiting that to happen. The future is in the SMEs.


If we would make an interview with you one year from one, with what would you be satisfied? How many IPO you plan to facilitate in the near future?

F. V.: Naturally, opening a new market like this is a hard task, but only until the first companies appear. After the first few successful transactions it can even happen that suddenly dozens of companies go public on this market. But as we are still waiting for the first ones everybody is still cautious, so I would be satisfied with two or three companies in the first year. In the second, however, I wouldn’t be satisfied with this number.

Z. J.: I agree with this; a lot depends on the first few transactions. Not only the investors, but the companies also like to follow a known path. It has to be seen that it is very hard to attract the owners of the companies to the stock exchange, even if it is an ideal solution in every aspect. But good examples are encouraging them to follow. All in all, I would also be happy with more than one transaction in this first year.