The Amazing Vanishing Russian IPO

Russia’s stock market is hot. Powered by soaring oil prices, the benchmark Russian Trading System index rose 11 percent in the first two months of the year while most other emerging markets slumped. So why were three initial public offerings of Russian companies pulled from the London Stock Exchange in rapid succession last February? Investors say the answer is their oligarch owners’ unreasonable price expectations, enabled by too many investment banks chasing too little business through their Moscow offices. “The pricing process is not very well grounded on planet earth,” says Bernard Sucher, a board member at Aton Investment Group, a brokerage firm based in the Russian capital.

The three cancellations – from coal miner Koks, oil and gas pipe builder Chelpipe, and precious metals digger Nord Gold – made a disappointing start to a year that was supposed to bring Russia back to the IPO main stage, according to those same investment banks out scrapping for the mandates. Moscow-based Renaissance Capital predicted Russian private companies would raise $20 billion in equity market debuts during 2011, and sell-offs from state companies would add another $10 billion. That total would approach the country’s record $36 billion in issuance during the glory year of 2007.

Unfortunately the 2007 sales proved less than glorious for investors. Shares in state oil company Rosneft trade barely above their Sept. 2007 starting level, despite the renewed boom in world crude prices. State bank VTB has lost 40 percent since the day it went public.

这群密切关注俄罗斯的基金经理原本希望，2011年IPO类股能够吸取历史教训，为自己的发行定价，为买家带来更多利好。到目前为止，情况并非如此。例如，一位投资者表示，Nord Gold（由摩根士丹利（Morgan Stanley）和瑞士信贷（Credit Suisse）提供咨询服务）试图以比Barrick Gold等全球同行低10%的价格估值。市场将要求至少下调25%的价格，以抵消俄罗斯的政治和操作风险，因此该协议被搁置。

One ingredient in this losing formula is the typical Russian oligarch who owns the asset. (Nord Gold is a subsidiary of steelmaker Severstal, controlled by billionaire Alexei Mordashov.) These men made their fortunes through the brutal process of 1990s privatization, where winners did indeed take all and any sign of weakness could be literally fatal. Leaving something on the table is not particularly in their DNA. The Kremlin also rushed to prop up any productive industry during the crisis of 2008-09 with liberal credit from VTB and other state banks. That leaves the oligarchs less pressed by their large debts than they would be otherwise, and less desperate for cash from the market, particularly now that business has rebounded.

The other element, investors say, is investment banks that have thrown off their traditional role as underwriters who actually buy a chunk of the stock they are issuing themselves. The banks’ Russian offices, at least, act only as advisors to their IPO clients for a diminished commission of around 1.5 percent. That creates an incentive to name almost any price in order to please the seller and win the mandate.

一些投资者仍然希望市场能够找到合理的价格水平。繁荣资本管理公司（Prosperity Capital Management）首席经济学家利亚姆•哈利根（Liam Halligan）指出，俄罗斯企业去年秋季首次公开募股（IPO）筹集了约40亿美元资金，买家已将大部分资金转为可观的利润。繁荣资本管理公司持有约50亿美元的俄罗斯股票。黑幕中的问题也多种多样，令人鼓舞，其中包括社交网络提供商Mail.ru、桥梁和公路建设商Mostotrest、零售连锁店O'Key和Transcontainer，一家从俄罗斯国有铁路分拆出来的货运公司。

Halligan is looking forward to a new smorgasbord of share offerings later this year from leading iron ore producer Metalloinvest, cell phone realtor Evroset, and perhaps a few of the utilities spun off a few years ago from former state monopoly UES. Whether he will like the price is another matter.