Russian IPOs – Review of 26th Week of 2007.

THIS POST WAS ORIGINALLY PUBLISHED JUNE 30, 2007

Russian IPOs – Review of 26th Week of 2007. 

Is Russia Going to Help US Economy?“The next globalization battle lurks over the horizon, but you can already guess its contours. It will be shaped by two revolutions in finance and business: the growth of vast government-controlled investment funds abroad and the muddled progress toward shareholder democracy in this country.” This is a piece of Washington Post “The Next Globalization Backlash. Wait Till the Kremlin Starts Buying Our Stocks” by Sebastian Mallaby (June 25). While this examines all the issues related to sovereign funds, it is worth to note this months’ trip to Moscow by Treasury Deputy Secretary Robert M. Kimmitt. Little is known on the results – the only brief interview was published by RBC-Daily June 25. Basically all discussions were centered on the Stabilization Fund of the Russian Federation and possible investments into US economy. As of June 1 the Fund has $ 116.8 billion and in 2008 it will be spilt in two: the Reserve Fund and the Fund of Future Generations. It is widely assumed here in Russia that both Funds should invest outside the country. Mr. Kimmitt in his statements expressed the idea that the US economy is a good target for Russian investments. As you may read in Mr. Mallaby’s article, the sovereign funds are now abandoning their long time strategy of investing in US Treasury bills and turning to investing in companies (SIC! - Blackstone Group (NYSE:BX) - China). Was it the issue that Secretary Kimmitt discussed in Moscow ?

Russia – Strong Bank Assets
Russian Bank assets grew 11.1% to RUR15.599 trillion (approx. $599.11 billion) in Q1 2007, the Bank of Russia announced this week. The aggregate capital of lending agencies rose 19.3% to RUR2.019 trillion (approx. $77.74billion), boosted by the IPO launched by Sberbank (RTC:SBER) of Russia in Q1. The number of credit institutions boasting a capital upward of EUR 5 million in terms of rubles reached 59.2% of the total number of lending agencies which operated in Russia as of April 1, 2007, up from 56.9% as of January 1, 2007.

And More Private Wealth in Russia

This week financial services group Capgemini and Merrill Lynch (NYSE: MER) released “WORLD RICH REPORT 2007” that says that that number of millionaires in the world increased by 8.3% in 2006, with about 9.5% million individuals now estimated to have more than a million dollars in financial assets. The club of “High Net Worth Individuals” (HNWIs) expanded more in 2006 (11.4% over 2005) with Singapore, India, Indonesia and Russia producing the greatest number of new millionaires. Regarding Russia here is a graph form the report.

OMX and Russia

OMX (NYSE:OMX) is stepping up its activities associated with Russia. This week two events shape the news about the stock exchange. Trading in EnergyO Solutions Russia AB (“EOS”) was commenced at First North, OMX’s alternative investment market. This is a new investment company that just a few months ago started its operations and has in its portfolio assets of Russian electricity companies. The prospectus of the company gives a good overview of the sector and its current situation.

The second event was the “Dual IPO in Moscow and Stockholm for mid-cap Russian companies” conference that was held in St.Petersburg with participation of the Swedish Embassy. Unfortunately I learned about it too late to attend but from advertising materials I understand that it was a quality presentation of possibilities for Russian companies.

Martha Stewart Loves Russia
Martha Stewart, the founder of Martha Stewart Living Omnimedia Inc. (NYSE:MSO), is very close to launching her Martha Stewart Living magazine in Russia. This week RBC Daily reported that several market players received proposals on cooperation with her company. Russian experts believe that this effort might be successful, but Ms Stewart is not well known to the Russian audience. However, if she would be able to attract to the project some Russian celebrity – that might add more popularity. Stewart was highlighted in Russian press in April this year when she came to the space town of Baikonur to say goodbye to Charles Simonyi, a software engineer and developer of Microsoft Word who paid between $20 million and $25 million for a 13-day trip to the space station.
New IPO Candidates

• Transaero Air carrier – as the first step to the planned IPO closed a private placement deal with the sale of 4% of its equity.
• Technosila electronics retail chain – as the first step for planned IPO issued CLNs for $ 100,000
• Inter RAO UES, Russia's electricity import and export operator – IPO in 2008
• Kamaz (RTS: KMAZ) – possible IPO for $300 million in the second half of 2008
• ST Group Region investment construction company – LSE IPO in MaY 2008 with the hope to raise $ 1 billion
• Irkutskenergo, one of the largest power generating companies – IPO in 2008
• Neloaks gold mining company – possible IPO on AIM this autumn
• KuibyshevAzot, a chemical company – IPO at the beginning of 2008
• ALMAZ-ANTEY, a leading vendor of air defense systems – IPO somewhere in 2009-2010