The Televangelist Of Prague's Stock ExchangeKaren Lowry Miller
It's 6 p.m. on Thursday, and Czechs nationwide are tuning in to a popular TV business show. As primitive charts lurch across the screen, investment banker Zdenek Bakala explains the stock market's latest moves. CNN it's not, but slickness isn't the point: Bakala is making burza a household word for his fellow Czechs.
It's a heady time for the 34-year-old financier. Fifteen years ago, he fled Czechoslovakia to start a new life in the U.S. Now, he's back to make his fortune--and help develop Czech capital markets. Bakala serves on the board of the Prague Stock Exchange and advises the Finance Ministry on revamping the country's weak securities laws. Last year, he set up Patria Finance, Prague's first homegrown investment bank. "For making money, it's the opportunity of a lifetime," Bakala says. "But it gives me a warm and cuddly feeling to think I can help advance the country, too."
In Central European markets, both tasks are a tall order. The Prague stock index has fallen 60% since last summer, when the market's postprivatization rally faded. What's more, the Prague Stock Exchange, capitalized at $17 billion, is one of the region's least transparent markets. Prices of more than 900 listed stocks are fixed once a day, while a handful of players trade blocks of stock over the counter among themselves. Companies often ignore disclosure rules.
SECOND WAVE. Bakala thinks better days are ahead. And he's betting that his combination of Yankee knowhow and local contacts will give him a boost as Czech markets grow. Since setting up Patria, which means "fatherland," a year ago, he has moved quickly into securities trading and stock-and-bond underwriting. Business could pick up after Mar. 1, when nearly 700 new companies list their shares on the exchange, as the second wave of privatization winds up. They include companies such as the phone monopoly, SPT Telekom.
Bakala, born in Brno, southeast of Prague, learned to grab opportunity early on. When he was 19, he fled the country by way of Vienna. With $50 in his pocket, he flew to California. Working at a Lake Tahoe casino, he learned enough English to get into the University of California at Berkeley, where he graduated in 1986. He went on to get an MBA at Dartmouth College.
In 1990, Bakala's fortune took another unexpected turn. Hans-Jurg Rudloff, then chairman of Credit Suisse First Boston Corp., asked him to open the bank's Prague office. Bakala whipped the operation into shape for the launch of the Prague Stock Exchange in April, 1993. But when the head office took power from local managers, Bakala began plotting a change.
In April, 1994, he jumped ship with the office's chief trader, Martin Ruzicka, and its settlements officer, Natalie Vlckova, 28. After trading stocks out of a borrowed office for a few months, they set up Patria. Rudloff, who has since founded MC Securities in Geneva, took a minority stake in the company.
Patria was profitable from the start, Bakala says. In its first year, it earned big margins by trading securities such as Galena, a drug concern, and Komercni Bank over the counter. Although the company suffered a major blow on Feb. 19, when Ruzicka, 27, was killed in a car accident, Bakala says Patria's other traders will keep the business going.
Meanwhile, he is lining up corporate clients for public stock or bond offerings. Patria's edge will be in that area, Bakala thinks, as the market matures. The company has managed a $37 million corporate bond issue and will soon lead another. And it has set up a unit to work with private pension funds. Says Martin Kryl, capital markets chief at Zivnostenska Bank: "Bakala is creating a new level of service. The Czech banks need such competition."
With competition growing, Bakala thinks it won't take long for Prague's market to improve its standards. The securities law will likely be strengthened. And since the economy is fundamentally healthy--with expected growth of 4% this year--Bakala thinks the Czech market will regain its attractiveness to foreign investors. From the trading room to Czech TV, he's making it his business to get the message out.