Russian IPOs on the radar
With a wave of Russian companies preparing to list, with more than $2.7 billion expected to be raised in April, Business RT spoke David Buik from BGC Partners in London.
RT: There's a whole host of Russian companies looking to raise capital in London. Real Estate company, Etalon, mobile phone vendor Euroset, the bank Nomos, and agricultural holding, RosAgro. Do you think they've got the timing right?DB: “It’s always very hard to say.The number of times the map has changed as regard IPO’s in the last ten years is extraordinary.Once we came though, on an international basis, the pain barrier, when we used to see huge numbers – 2 or 3 hundred in the United States and UK every year between 1996 and 2001, all of them eagerly accepted.And then as the economy went downhill to 2003, there were less and less of the rather bigger variety ones.And basically he investing public generally has become rather cynical.So when we see an awful lot more cancellations, with people saying he climate is not quite right, sentiment’s changed, the stockmarket is down with geopolitical problems – any excuse or reason you like.So you can actually have an extremely good company – you can have your share price very well priced, you can provide really great opportunities for the investor, but if sentiment is not right then it doesn’t go. And I wouldn’t be remotely negative about any of these IPO’s that Russia is putting forward – they all have very credit worthy reasons for doing them.It is just a question of timing.”RT: So what do you think the appetite is like for Russian companies in the London market right now?DB: “Well, I think everybody looks and sees how well Russia has done in the course of the last four years, and what the opportunities are, because you have internal growth, which many other countries, apart from the Far East, are extremely jealous of – and they realize that the opportunities for growth in Russia are absolutely enormous.So they should be, to all intents and purposes enticed into investing in Russia – there should be no question of any doubt about it.We would encourage that.It is the way forward, it has to be done.But unfortunately Russia is no different from any other country in the world, and, as I say, keep reverting back to sentiment, and now we generally find that many of the investment banks are finding to their cost that they tend to be rather ambitious over price on many IPOs, and I think that also you really have to offer the investor guaranteed profit on the first day of trading.And if he doesn’t feel he’s getting it, they would rather feel they would leave it. “RT: Rostelecom looks like it will be delaying its London offer; it cites the problems in Libya and Japan. How much are those crises muddying the water?DB: “Well for that specific company, clearly they are muddying them, because, as I say, the geopolitical problems are something that we never legislated at all for six months ago, and here we have them staring us large as life in the face.And really, as I say, until such time as we have some kind of peace and tranquility – whether it’s in Libya or in the whole area, because it is not just Libya unfortunately.It follows in the wake that there is problems in Yemen, there are problems in Syria, and even a little unrest in Saudi Arabia, which is very disconcerting, and very, you know, very damaging, in terms of sentiment for the entire region.And of course that does filter in to what we are doing in the western world as well.So, I think in terms of that, in terms of clients and access to these sort of areas, it won’t entice investors in until there is a little bit more stability in the region.But that by no means says the company is written off – far from it.It’s like all these things, it is timing.The most important thing that Russian companies can do, it’s the same for UK, German, British, American, is get a really good share register.Therefore time should not be wasted, should be able to go on the road with the investment bankings, taking the management of these companies, introducing them tom all the fund managers around the world, so that they can sell the really plus points of their companies.”RT: In February Chelpipe and Severstal's gold unit – Nord Gold – were supposed to go to the market, but pulled out at the last moment. Are there any consequences to not going ahead with an IPO? DB: “The consequences in my opinion are temporary. The consequences are that there is nothing worse than giving your company a bad sendoff.You must give your company – when you take it to the altar of public flotation – the biggest sendoff in the world.Full acknowledgement from the press, analysts, and from everybody, that this is the kind of company that fund managers and the retail investors should be investing in.If the conditions are not right, right up to the last day, then pull it, and you are pulling it for exactly the right reasons and not the wrong ones.”