Gun Maker IPO Is Rare Boost for Dwindling Prague Stock Market

(Bloomberg) -- A Czech producer of firearms is preparing Prague’s first initial public offering in more than four years, providing a tentative green shoot for the stock market plagued by delistings and shrinking volumes.

Ceska Zbrojovka Group SE aims to sell as much as 150 million euros ($177 million) of new and existing shares and may increase the offering by 15% if there’s enough demand, the company said Wednesday. The supplier of guns to armed forces, which will publish more details once its prospectus has been approved by the central bank, plans to use the proceeds to finance expansion, including a new factory in the U.S.

If successful, CZG’s listing would be a rare win for the Prague Stock Exchange, which has seen years of waning interest from issuers, investors, traders and analysts. An underdeveloped pension-fund industry and a risk-averse retail buyer base are curbing demand for equities, while companies overwhelmingly prefer debt financing over share sales.

The Czech market tallies only 22 stocks, compared with 46 in Hungary and 795 listed firms in Poland, according to data compiled by Bloomberg.

“While a new IPO would be a welcome ‘shot in the arm’ for the stock exchange, this one isn’t big enough to avert the market’s slow death by a thousand cuts,” said Jeremy Monk, a money manager at Prague-based Akro Investicni Spolecnost AS. “Many private and institutional investors may also be reluctant to finance a firearms manufacturer.”

The market lost out on what would have been a banner IPO in 2018, when Prague-based computer anti-virus program developer Avast Plc chose to float in London with a market value of about $4 billion. The last listing on the Eastern European country hosted was Moneta Money Bank AS’s offering in May 2016.

Trying to reverse the slump, the Czech exchange has reduced fees, launched a market for startups and cross-listed stocks from abroad, which now account for half of the PX Index’s weighting. Still, buyouts and delistings cut the traded volume by 77% in the decade through 2019, even as turnover jumped 31% for Poland’s WIG20 Index and 137% for the MSCI Emerging Markets Index.

CZG’s planned debut comes as computer-game maker Bohemia Interactive AS said it is considering selling shares to finance potential acquisitions. The two potential bright spots contrast with the PX Index of only 12 equities facing an imminent delisting of textile company PFNonwovens SA and television broadcaster Central European Media Enterprises Ltd.

“A Ceska Zbrojovka IPO would definitely be positive news for the Prague exchange,” said Martin Cakl, an equity analyst at Patria Finance AS. “We can only hope that this will inspire other companies looking to raise capital.”

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