THIS
POST WAS ORIGINALLY PUBLISHED JUNE 11, 2007
Russian IPOs – Review of 23rd Week of 2007
Rhetoric and Investments
This week there had been a lot of things going on regarding investments in Russia and associated discussions. Political rhetoric added more fuel to it. Richard Shaw (QVM Group) posted “Investing in Russia: The Good News and the Bad” . While analyzing positive factors Mr. Shaw ends with: “The
big gains in the Russian stock market could well be more history than
future. The political risks to your wealth in Russia are much greater
now than they were perceived to be a few years ago.” The Motley Fool posted notes by Zoe Van Schyndel “Russian Bear or Bull?” that also chides: "Russia
is an emerging economy which, a decade ago, was nearly bankrupt. A lot
has changed since then, but whether the opportunities in the Russian
market are outweighed by the risks is a tough decision at this point. If
oil prices stay at their lofty levels, this market is a safer bet, but
if oil drops significantly, I wouldn't want to be anywhere near this
bear.” In my view, more realistic was CNBC discussion on June 7 on investing in Russia. Ian Hague, Firebird Management LLC
fund manager, admits that tensions between the U.S. and Russia have had
an impact on investor sentiment, but advises that investing in the
Russian market requires a long-term commitment just the same. Investors
are focusing on the wrong thing: "Political rhetoric in Russia has less of an impact on the conduct of business as you might think." Alexander Kliment, an associate in Eurasia Group's Europe and Asia Practice, spoke at the "Power Lunch"
to dispel investor anxiety. He describing global business and politics
as "two different voices" -- and the "political noise" hasn't dampened
investors' "bullish interest." Surprisingly, he said even foreign energy
companies are interested in Russia -- despite Putin having nationalized
many energy assets and producers like oil giant Yukos, and the Russian
government jailing Yukos' ex-CEO Mikhail Khodorkovsky. I completely
agree with all this, and want to add more. Those who are here in Russia
do know amore about the investment sentiments and they have a good
opportunity to judge the situation by themselves – this far more
reasonable than trying to understand Russia from Miami or Washington
D.C. Just this week’s example - Coca-Cola intends to invest roughly $1.5 billion in its Russia’s projects in the following five to eight year.
Venture and IT Financing News
The Russian Government is seriously changing its attitude to financing of venture companies. A very descriptive article
is presented by VentureBeat where one of the Russian officials
describes the new efforts being made recently. To this end it is
relevant to mention the results of the public poll that was conducted by
FINAM INVESMENT COMPANY at the Web site:
-
65.1% of investors replied that they are interested in investments in
the Russian IT sector, while only 18% showed their negative attitude
- 64.1% are ready to invest buying stock; while direct investments and staring the companies are not very popular.
In
general IT sector shows extensively good growth tempo, however, so far
there are virtually no companies at the public market. Many investors
look for “the Russian Google” to invest into, but, I guess it
is still too early. This is double sided picture – negative, if you
think about absence of issuers; and positive when you think about
prospects of entering the market by new players. We still do not see
many public IT companies – in April both MICEX and RTS started trading
stock of ARMADA, and only next week the first issuer for the MICEX’s Innovative and Growth Sector (“Russian AIM”) is launched – this is the FINAM-IT Venture Unit Fund.
New Face on the Banking Market
Bank
of Cyprus was granted a license to operate in Russia. This is the first
bank from Greece and Cyprus that entered the Russian banking market.
Initially the bank’s activities will be focused on establishing of the
credit portfolio and expansion of its services scope for existing
corporate clients. Bank of Cyprus will work primarily in Moscow and
St.Petersburg. According to the Russian regulations within two years
after registration the bank has no sight to work in retail sector. It
officials confirmed that they plan their expansion to Ukraine and
Romania.
More Private Funds
UNEXIM
GROUP Private Investment Fund was formed at the end of May in Moscow.
The fund is based on the assets of Mikhail Prokhorov, who is the partner
of Vladimir Potanin, President of the «Interros» Company. Prokhorov owns 22% of NORNICKEL, 22% of POLYUS
and 50% of INTERROS that he values at $ 17 billion. UNEXIM GROUP will
focus on innovation high-tech projects in energy (including hydrogen),
nanotechnology and in mining and metallurgical sector. Each of
investment projects for the group’s portfolio shall be valued at least
$1 billion.
Russian IPOs – More to Come
According to Elena Khisamova, Vice-President of Deutsche Bank Russia, the Russian companies would attract from IPOs in 2007 three times more than in 2006
– up to $ 44 billion. According to Ms Khisamova this year Russian
companies raised about $22 billion; $ 15.4 billion goes to foreign
listings (12 companies), $ 6.5 billion – listings at domestic markets (4
companies). There is also a projection from Eversheds law firm in London that around 70 Russian companies are currently queuing up to list in London.
Some of these companies will never make it to market while some will
float on the main exchange and a good proportion are likely to make it
on to AIM. Eversheds is currently working on 2 prospective AIM floats
from Russia and they note that half the companies waiting to list are
active in the utilities sector, while the remainders range from media
companies to chemicals producers.
Here is the latest update from Business & Financial Markets on 10 latest IPOs.
Exchange
|
Currency
|
IPO Date
|
Price at date of IPO
|
Price as of June 08, 2007
|
Change, per cent
| |
LSE
|
USD
|
05/31/07
|
25.000
|
23.379
|
-6.48
| |
RTS
|
USD
|
05/31/07
|
32.000
|
35.400
|
+10.63
| |
RTS
|
USD
|
05/22/07
|
2.300
|
0.00
|
0.00
| |
RTS
|
USD
|
05/18/07
|
14.400
|
13.950
|
-3.13
| |
VTB additional
|
MICEX
|
RUR
|
05/14/07
|
0.136
|
0.143
|
+5.07
|
RTS
|
USD
|
05/03/07
|
58.200
|
62.000
|
+6.53
| |
RTS
|
USD
|
04/27/07
|
53.000
|
46.750
|
-11.79
| |
AIM
|
GBP
|
04/25/07
|
299.000
|
298.000
|
+0.33
| |
MICEX
|
RUR
|
02/22/07
|
89,0000
|
94,000
|
+5.62
| |
INTEGRA (GDRs)
|
LSE
|
USD
|
02/21/07
|
16.755
|
18.815
|
+12.33
|
Source: Business & Financial Markets
New Announcements
- KIT FINANCE Investment Bank – IPO on MICEX in 2007 and LSE in 2008
- Arsagera Asset Management – IPO in 2007
- URALSIB BANK – IPO sometime before 2009
- INVESTTORGBANK - IPO at the end of 2008
- Sukhoi Civil Aircraft – IPO after 2010
- Euroset mobile handset retailer – listing on RTS in autumn 2007; IPO in 2008
- LSR Group, a St. Petersburg construction firm - IPO in November 2007
- Far East Energy Company – mulls IPO in the nearest future
- MAX Insurance Company – IPO in 2011
- SISTEMA MASS-MEDIA – IPO in 2009
- ST Group, developer company – IPO in May 2008 on LSE
- Aeroflot Russian Airlines - IPO in the near future
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