New Russian IPOs - The Russian AIM WAY – further prolegomenon

THIS POST WAS ORIGINALLY PUBLISHED MARCH 29, 2007

New Russian IPOs - The Russian AIM WAY – further prolegomenon

This morning BUSINESS FM radio (the first and only Russian business radio that successfully was commenced a while ago) carried a commentary that questions the success of all announced IPOs this year. The commentary cites offerings.ru experts that currently about 90 companies announced their plans, but it seems that only one third of them are viable for listings (with expected $ 20-25 billion raised). My thinking is that it may be true, in a view of recent announcements of some companies of RAO UES to postpone IPOs. The station also quotes MDM bank expert that in his view the real chance for IPO have no more than 15 companies. The major reasons for these events may be

(i) fears of outflow of capital from emerging markets;

(ii) plans for big IPOs in the nearest future;

(iii) understanding of management of the companies that the transparency procedures require a lot more time than it was expected;

(iv) many companies made IPO announcements as part of their marketing campaign. 

I studied the mentioned web site and could not find such commentary; however, there is a good list of planned announced IPOs both for 2007 and for 2008.

Anyways, that station and its experts did not mention the possibilities of domestic market.
Some time ago I discussed news about establishment of the Russian alternative investment markets. Now it seems that this process is going further on. RTS START has three companies listed in this new sector, and MICEX is getting ready for the first listings. Within the nearest months we will hear some interesting news, and as the prolegomenon for this I would like to share some information that FINAM analytics prepared while evaluating mentioned undertakings.

 

Of course we here in Russia are not reinventing the wheel, rather both stock exchanges tried to use the experience of world’s junior markets and adapt them to the Russian realities. From the general point of view the two sectors are the same, but they do have some peculiarities. Both RTS START and MICEX IRK are not standalone entities rather they are the integral parts of the corresponding exchanges – and this certainly affects them. What differentiates them – listing requirements and some peculiarities on the essence of advisors. And of course, technologically MICEX is a tad more advanced using updated hardware.

Here I would not elaborate much, but I guess, most vital data is expressed in the table (which is to my knowledge the fist attempt to make public such comparison)

Once again, this year will be crucial for all IPO efforts. A lot of information will be available at the Third Russian IPO Congress April 13 in Moscow.

In a very short time we will see whether the Russian stock exchanges’ efforts will be fruitful; shall we see an influx of issuers and IPOs? My guess is yes, there are lots of opportunities. Erik Wenngren, director of international listings at Euronext, stated that less than 1% of the one million SMEs in Europe are listed. In Russia this number is much much less.