VTB shares yo-yo as bank mulls buyback at listing price

VTB shares have fluctuated wildly on mixed reports of a share buy back for those who participated in its IPO, two years ago. Promoted as the ‘peoples IPO,’ VTB shares are now worth about 1/3rd the listing price.

VTB shares have rallied in the last week after the bank announced it’s considering buying back its shares at their IPO price of 13.6 kopecks per share. Those same shares closed at 2.8 kopecks apiece on March 31, meaning that any move by Russia’s second largest bank to buy back at its listing price was sure to attract attention. The spike in its share price over the past week – to beyond 4.5 kopecks per share on Tuesday – is a sure sign that it got it.

On Tuesday the bank clarified its position, saying it would only buy shares back from those who bought them during the IPO.

But Wednesday saw the VTB share price slump 7% in Moscow after a board member said the proposal may be rejected by the government.

Rusrating Director, Richard Hainsworth, says its an example of an open policy debate – a feature of Russian market behaviour – with dangers for the unwary.

“Given that there has been a net gain in a share price of VTB, in a sense one could say these announcements have served the purpose that they were intended to serve. But I think it’s a lesson for all foreign journalists and investors that one has to bear in mind the context in which the statements made by Russian policy makers  – it is part of a debate, it’s not necessarily a decision which has been taken and will be followed though to completion.”

Market players say VTB’s proposal is populist and economically groundless. Many think the bank is likely to run losses this year and is already asking the state for some funding, and Natalia Orlova, Chief Economist at Alfa Bank doubts the state will give out cash merely to compensate unlucky investors.

“Now the State has a lot of banks they will have to support, they have a lot of companies they will have to support. And they are facing the need to increase pension payments and public salaries. I'm just saying that probably VTB's buy-back is not a very money consuming project, but there is the risk that if this approved, there will be a number of other companies or banks asking for State support."

Few investors that hung on to their stock have gained much from the so-called people's IPO. Now, some short term speculators may have got their fingers burnt too.