Russian IPO rush means investors can be choosy

February 2, 2010

Russian initial public offerings are set for a comeback. Some $20 billion of Russian share sales are forecast this year, including dozens of IPOs. With plenty of options, investors should be able to drive a hard bargain.

Following a two-year lull in activity, bankers are excited at the prospect of a return to the heady days of 2006 and 2007, when Russian companies raised some $37 billion in 42 international share issues. Media group Profmedia plans to raise $500 million in April with a London listing, while iron ore miner Metalloinvest and coal miner SUEK are mulling billion-dollar IPOs in 2010.

Russian new issues have been understandably popular with investors in the past. They tend to be sizeable and offer exposure to high-growth sectors. The Russian stock market also appears less expensive than other emerging markets on some measures.

But issuing companies’ bosses often have inflated estimates of what they are worth. Around two thirds of all Russian IPOs have underperformed the local stock market since issue date, in some cases losing 80 percent of their value, according to data compiled by Renaissance Capital.

That suggests the prices of previous Russian IPOs were too high. This time, it should be different. Aside from the sheer number of possible candidates, many Russian companies are under pressure to raise money quickly. They borrowed heavily before the crisis and need cash fast.

Uralsib Capital estimates that Russian companies will issue $55.5 billion of equity in 2010 and 2011, of which $17.5 billion is required to repair balance sheets. The Profmedia IPO, for instance, would help repay some of parent company Interros’s $2 billion of debt. With local finance still scarce and expensive, smaller and less indebted Russian companies also need to raise equity to kick-start stalled expansion plans.

Investors during the last wave of Russian IPOs were too willing to stump up cash. This time, it should be more of a buyer’s market.


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This article has no context, ignores issuance costs and prospectus’ contents’ trends. This place has +- 15 times zones and +-150 dialects, I think there is more to it than someone chopping wood on the steppes or heads in Gorky Park.

Posted by Ghandiolfini | Report as abusive

IPO rush in any market is counter productive. There are times when investors run amok with little direction and IPOs seem a safer bet (especially in a market bereft of investment options).

Why is it necessary that one waits till the market stabilizes? There can be quite a cascading effect if the IPO market is tapped too much, too soon. Read more at  /2010/02/whats-hurry.html

Posted by NChandramouli | Report as abusive