On the 19th of December last year, the Romanian Government introduced a set of new tax regulations which targeted local banks and energy companies. As a result, shares of those companies suffered huge losses in value, with prices plummeting up to 20% in just one trading session. Today we observe how the prices recovered and how much were investors who decided to act rewarded for their risk.
A Short Reminder
When looking at the chart showing the legislation impact on share prices during the first day, one can notice how unexpected the legislation was and how grim the initial predictions were. This is especially noticeable when looking at the banking sector where shares of Banca Transilvania plummeted 20%, while BRD Bank witnessed a decrease of 17%.
Impact of Ordinance 114 on Share Prices
Source: InterCapital Research, Bloomberg
What Happened After
However, as it turned out the proposed tax burdens were significantly lessened as investors and companies’ Management revolted, demanding a revision of the legislation. Afterwards, as the full effects of the legislation became clearer, it was obvious that the financial hit on the companies will not be as hard as initially expected and share prices started to recover. Thus, investors who took on a lot of risks last winter when they started buying, have significantly increased the value of their stock portfolios.