In the runup to the UNESCO listing ‘analysts’ flooded the media, arguing that a UNESCO nomination would seal Romania losing the CAN$ 4.4 billion case. And they blamed those supporting Rosia Montana to become a World Heritage site for it.
Those in favor of a nomination argued that World Heritage status would increase Romania’s chances of winning the arbitration because it bolsters Romania’s defence.
In the 5 days running up to the nomination, Gabriel’s Resources’ share value fluctuated downwards. The more the Romanian government solidified its decision in favor of submitting the nomination, the more the share price went down (see Fig 1). Gabriel’s main shareholders are a mixed bunch of investors hoping to profit from Romania losing the arbitration case. They are hoping to get a fat share of the CAN$ 4.4 billion award.
If a UNESCO nomination would seal Romania losing the arbitration case, then the share price should have increased. But instead the share price has been falling. This means that shareholders are losing faith that they will make a sustained profit. And this means that they are losing faith in winning the arbitration case.
On the 27th June, the day of the announcement that Rosia Montana was accepted to the World Heritage list, the share price fell to its lowest and was met with an increase in share purchase. However, the downward trend of the share price continued regardless – as we can see from Fig.2.
The market is contradicting what ‘analysts’ predicted. There exist several reasons for the share price to fall and here is one:
Shareholders realised that Gabriel Resources is no longer able to control and coerce the government – as was the case until 2013 and again under the Dancila government when PSD put the UNESCO dossier on ice. The government’s decision to break away and proceed with the UNESCO nomination translates to shareholders that the Romanian government has the confidence to win the arbitration case. This is what the fall in share price is indicating right now.
The share price will change again over time but the shareholders reaction to the UNESCO nomination won’t. Whether Romania will win ultimately depends on the legal strategy and the legal team’s ability to transcend that confidence. That will be known only next year. The market will certainly react to that, too.