Warsaw Stock Exchange suspends due diligence on Armenian exchange

Dietl told PAP Biznes that the GPW would not be committing any funds to the transaction until the conflict with Azerbaijan over the disputed territory of Nagorno-Karabakh was over. Rafał Guz/PAP

The Warsaw Stock Exchange (GPW) is suspending the process of due diligence into the Armenia Securities Exchange until at least the first quarter of 2021, due to the conflict over Nagorno-Karabakh, GPW President Marek Dietl has told PAP.

In mid-September, the Warsaw Stock Exchange signed a term sheet agreement with the Central Bank of Armenia (CBoA) on negotiating the purchase terms for a 65-percent stake in the share capital of the Armenian Securities Exchange. The CBoA owns an 85-percent share of the Armenian exchange with the remaining 15 percent being held by the exchange itself.

Dietl told PAP Biznes that the GPW would not be committing any funds to the transaction until the conflict with Azerbaijan over the disputed territory of Nagorno-Karabakh was over. He pointed out that, from the outset, the transaction contained a provision that the GPW could withdraw within three years and regain all its invested funds.

"Long-term our attitude has not changed," he said. "The conflict over Nagorno-Karabakh has lasted for over 30 years and we were aware of that."

"“When investing in a place so marked by geopolitics, we tried to prepare conditions that would secure the interests of the stock exchange as much as possible," Dietl said. "On the other hand, the business of new technologies in Armenia is flourishing and there is a certain analogy to Israel, which also experienced its greatest boom in the early 1990s, while at war with all its neighbours.”

The GPW president said that the Warsaw exchange is working with the European Bank for Reconstruction and Development (EBRD) and the Armenian exchange to create a business plan and 17 strategic initiatives that were defined during a year and a half of negotiations.

"However, due diligence and our full capital engagement must be postponed," Dietl said. "I would like to make it clear to our shareholders that we will not commit financially until there is a clear de-escalation in the conflict in Nagorno-Karabakh."

Dietl went on to say the Warsaw bourse would probably not renew due diligence this year as first a business plan has to be worked out in order to know how much time and resources would need to be devoted to the Armenian capital market. He said the first quarter of next year was a "realistic timeline" to return to the due diligence process, provided international efforts at calming the situation were maintained.