Russian Firms Race Ahead to Raise IPOs
Apr. 21 – Four firms from Russia and Ukraine pressed ahead with share offerings to raise up to US$2 billion, with two lowering valuations following weak demand for a placement last week and a fall in share prices on Monday, Reuters reports.
Dozens of Russian companies plan initial public offerings this year, seeking to replenish their coffers after a recession and enabling their owners to lock in profits.
Some investors are predicting that the total raised could exceed US$20 billion, approaching the record levels seen in 2007.
The rush started with a US$2.2 billion Hong Kong IPO by United Company RusAl, the world’s top aluminum producer, in January, followed by a US$90 million IPO of seafood company Russian Sea last week, which drew weak demand from investors.
On Monday, fertilizer company UralChem said it wanted to raise US$496 million to US$642 million, steam coal company Kuzbass Fuel Company US$295 million to US$398 million, developer LSR up to US$773 million and Ukrainian egg producer Avangard US$198 million to US$256 million.
Together with drug distributor Protek, which started a roadshow last week to raise up to US$400 million, the total sum raised by Russian firms could exceed US$4.5 billion so far this year.
Emerging stocks fell more than 2 percent on Monday, heading for their largest one-day drop since Feb. 5, as investors became risk-averse, fretting about last week’s U.S. data and U.S. regulator Securities and Exchange Commission’s fraud charge against Goldman Sachs.
The stock market fall, combined with the weak placement by Russian Sea and sour memories from United Company RusAl’s placement, when the stock plunged by more than 10 percent at the start of trading, have likely weighed on companies, bringing down their initial valuations.
UralChem said it would be valued at US$1.2 billion to US$1.6 billion post-IPO versus an initial estimate of US$1.5 billion. KTK valued itself at US$945 million to US$1.276 billion post-IPO versus the initial US$1.0 billion to US$1.4 billion.
LSR set its secondary placement price range at US$10 to US$11 per GDR — in line with the market — and Avangard said it wanted to raise US$198 million to US$256 million — in line with an initial US$200 million estimate.
None of the share issues will directly generate new personal wealth, unlike in 2007, when a string of Russian IPOs created dozens of new billionaires.
UralChem will use the proceeds to repay massive debts, and LSR will repay debt and invest in new projects, while KTK and Avangard will expand and modernize equipment.
Russia’s highest-profile IPO to date this year, by United Company RusAl, was meant purely to help the firm repay debts.
The only businessman who has received a big lump sum was Maxim Vorobyov, the main owner of Russian Sea, although he did not get as much as planned. After the firm sold fewer shares than expected, he decided to take US$25 million instead of US$100 million.