Published: November 29, 2010
More local companies look to global exchanges for fresh funding.
Today Micex, tomorrow the world – or at least Nasdaq. For Dmitry Genkin, chief executive of Pharmsynthez, the Russian pharmaceutical company’s planned Ru528mn (US$17.6mn) IPO on the domestic Micex exchange is a stepping stone to an eventual listing on the US market. “It’s one place where you can fully realise your value,” Genkin tells emeafinance of Nasdaq, adding that he hopes to list the company there within the next three years.
That sort of ambition has been lacking in Russian equity markets for too long. In 2009 just one company, stem cell research business HSCI, floated domestically, with one other – Exillon Energy – listing in London. After aluminium group Rusal’s Hong Kong float at the start of 2010, the year saw an upturn in action, with five Russian companies listing during the first half of the year.
But it’s the second half of 2010 that has seen the biggest shift in sentiment. At the same time as Genkin and his fellow Pharmsynthez directors planned out their IPO to fund the company’s growth, other businesses eyed debuts on local and global markets.
Construction group Mostotrest raised US$388mn on the Russian exchange. Internet company Mail.RU and retailer O'key raised US$1bn and US$420mn respectively in London with energy group EuroSibEnergo expected to raise US$1.5bn in Hong Kong by the end of the year.
For many Russian companies, it is necessity as much as opportunity pushing them to launch IPOs. “Russian companies need the capital, both to grow and in other cases to repay debt or restructure and get themselves out of the crisis,” says Brian Zimbler, managing partner of law firm Dewey & LeBoeuf‘s Moscow office, adding that management teams will need to be aggressive in attracting investor attention.
They’ll also need to be braced for scrutiny. “We know that the market is reluctant to look at Russian companies and so they have a bit of an extra burden to come to market,” Zimbler says. “Nobody’s going to throw money at them anymore because it’s sexy – those days are over. So each company now has to prove the merits of its business proposal.”
Some have achieved that. Others have fared less well. In October, electronics materials manufacturer Monocrystal pulled plans for a US$284mn IPO in Russia. Chief executive Oleg Kachalov said it was a “difficult decision” but cited “considerable volatility in global equity markets”. “We may consider returning to the equity market at a future date when conditions become more favourable,” he added. Monocrystal’s loss may be other companies’ gain – if its management team prefer not to follow through on flotation plans, there will likely be plenty of others that will.