Global Capital Markets

Proprietary Intelligence
Story: Mosccow’s RTS exchange is capable of large enough listings to enable Russian companies to carry out billion dollar IPOs in Moscow rather than London, RTS president Oleg Safonov said. Meanwhile one senior investment banker said the rising number of listed Russian companies could lead to stock increasingly being used as acquisition currency in corporate takeovers.
Speaking at the Adam Smith CFO Summit in Moscow, Safonov cited Deutsche Telekom's sale of USD 1.5bn in mobile phone company MTS onto the Russian stock exchange as proof that the RTS is suitable for large domestic listings.
“IPOs of Russian companies should take place in Russia, and they are more effective in Russia,” he said. “Domestic demand for quality instruments outstrips supply, and large global players are showing growing interest in the domestic market.” Safonov said the current capitalisation of the RTS is only 1.5% of its total potential.
Many Russian companies that have carried out IPOs this year have chosen London rather than the Russian exchanges for their listing, a development that has caused concern with the financial markets regulatory body in Moscow. Safonov said the number of Russian listings abroad was a “bad trend”, particularly as the number of blue chips appears to be falling. Safonov noted that Yukos, once the largest stock on the Russian index, has now been dismantled, Sibneft has been acquired by Gazprom, while power utility UES is undergoing restructuring that will lead to its eventual break up into smaller companies.
Andrew Cornthwaite, managing director at Renaissance Capital in Moscow, agreed with Safonov that a London listing is not necessarily the best option for a Russian company looking to tap a wide investor base. As well as being cheaper, a listing in Russia is quicker and for many companies listing under USD 250m an RTS IPO may be the better route, he added. “An international listing will not necessarily improve the valuation or liquidity of a Russian company,” Cornthwaite said. “If you can place USD 1bn of stock in one day (as MTS did), it says a lot about the maturity of the market.” Meanwhile the increasing number of listed Russian companies could mean future M&A activity will be financed through companies using stock as acquisition currency, he said. Renaissance Capital currently has a pipeline of 10 IPOs it is advising on over the next 18 months, Cornthwaite added.