Interview with Tom Adshead

Tom Adshead, Portfolio Manager of Alfa-Capital joined Russia Today to share his opinion how market volatility affects IPOs.

Russia Today: Do you share the opinion of some analysts that if this market volatility does continue Russian companies will postpone their IPOs?

Tom Adshead: Well, I think you have to look at which companies are doing the IPO and what are the circumstances at the time. But most of these IPOs have already been carried out through a fairly tough filtering process. We had the situation maybe 12 months ago when it was quite easy to sell almost everything and at quite a high price on the Russian market, and we have had a few weaker IPOs this year. But I think what we have seen in 2007 is a company not comming to the market unless it already had a very robust demand case. So I think that now you'll find banks talking to the companies and they are really looking hard at what the story is, and how attractive it is likely to be to investors, and they are not going even to come to the market unless it is a good story. The example was made of Rusal. This is a great story: huge demand – great for the underlying asset – a very strong story both in Russia and abroad. I do not think they have a problem selling that story to the markets.

RT: And of course this is not just about international market volatility. For Russia it is also about the Presidential election coming up next year. So, say for example, who did postpone the IPO because of the market volatility? Can we be sure that the situation will be any more stable in six months time?

T.A.: Probably not. I think there are two issues for those particular actions. One is the political necessity for certain oligarchs to cash up before the elections. To be honest, I really do not believe that. I think anyone who has got that size of business under their control is very unlikely to need that kind of political insurance, and would fear whoever the likely successor of Putin is to that extent. So, there is no strong reason for them to rush to markets, cash out, and be gone to the south of France, whatsoever. On the other hand there is a perception on the investors’ part, supposedly, that Russia will radically change after the next elections. I think, this is a kind of myth. We are investors, most of the investors, who have been on this market for any time, have a very grounded stand of what the situation is and how really things might change after either the presidential or the Duma elections. Certainly there is some uncertainty, but I don't think anyone is under an illusion that the country will radically change in any direction. Therefore, I do not think that will stop investors buying a good story, because remember, if you look at these companies, at these decisions, their great stories been going on for years, regardless of what happens politically.

RT: So, in the light of that, should investors be worried about companies who appear on the Russian IPO market before the elections, purely because they are not aware of what is going to happen afterwards?

T.A.: That is the question of confidence of the management. I do not think there are any well-placed Russian management who would present themselves as looking to cash out. When you are buying an IPO, you are instantly suspicious whether it is just a purely management selling, and looking for a different owner, maybe, taking advantage of the high market, and that is the first warning signal and they stand to be not  very successful in the aftermarket. I think the type of placement you are going to get will not be of that quality, and I think those days are gone in Russia. You do not have that kind of deal happening to you.