Russian IPOs lining up for investors
RT: There have been a number of planned listings by Russian companies this year, but they haven’t been generally well received with some withdrawing at the last minute and some priced at a discount. Why?
Tom Blackwell: Well I think there are many of us that are looking forward to the return of the more vibrant Russian capital market story that we have had in the past. You are absolutely right, several of the deals recently haven’t happened as people would have hoped they would have done. But I think the issue is less with a fundamental problem with Russian IPO story. In fact post crisis a lot of the growth is back, leverage is much lower than it was, a lot of the fundamentals look good. So perhaps with the recent cases its more helpful to look at specific company or industry issues that played a role in those particular deals.
RT: Let’s be more specific. Such companies as Russian Helicopters or Euroset faced low investor demand. Is that a general trend with Russian companies?
TB:I wouldn’t necessarily call it a general trend, although certainly there were some themes there that we have seen in various deals. And I think perhaps in the case of Euroset, what you have certainly seen over the last couple of years is that investors have been less receptive to IPOs that have been primarily driven by a strong secondary component, with shareholders selling down. I think, potentially, in the Euroset case, that may have played a role. Russian Helicopters was a very different story. You had a company that was – there were no helicopter companies that had previously gone to market anywhere in the world, so that when they were coming to market there wasn’t an obvious group of peers that investors could evaluate and value against. And also it was a company that was relatively recently formed. Investors hadn’t had a lot of time to see how that business would perform. So I wouldn’t exclude the possibility of them coming back to a much more receptive market in due course, once they have had more time to see the benefits of consolidation and the synergies that have been derived from that process.
RT: Do you expect the Yandex IPO to outperform the Mail.ru IPO?
TB:Well Mail.ru listed very well so to outperform Mail.ru might be a challenge. But I think that if you look at the Mail.ru experience, but also what is happening around the world internet space you had LinkedIn that listed and went up 109% on its first day of trading – that’s an unprecedented amount. So I think that if you test the global appetite for exposure to new internet stocks, demand seems to be fairly high. So I would expect probably a positive outcome to that story.
RT: Does it make sense for an investor to buy into a Russian company during an IPO, or should they wait and see what happens?
TB: Over the years you have had a number of investors that have bought into Russian IPOs that might intuitively say to you, probably best to wait next time. If you bought from Amtel a few years ago, Russian Sea, more recently, there are investors out there who might have that view. Having said that again I wouldn’t draw a broad conclusion from that. I think that there is still potential to make money in Russian IPOs, and quite frankly we do still see the gap between valuation – the bid/ask spread on valuation. I think that gap is going to narrow over the course of coming months and I think we will see some very successful deals later in the year and early next year, and maybe some will be bad performers but I am sure some will be good performers post deal as well.
RT: And some companies are preferring to list in Hong Kong rather than in London?
TB: You have had a number of statements by Russian companies saying that they are considering the Hong Kong market. In reality the number of companies that are actually there is still rather limited and the performance hasn’t perhaps been quite what people would have hoped for. So I am not sure that that trend has necessarily been proven yet. Although globally that certainly is the case that there is the centre of power in global financial markets moving eastward. But by the way that also includes Moscow.