IPO horizon opens up for Russian companies

This year could see about 35 Russian companies raising money through IPOs, however the plan could be complicated by the strict Russian market regulations.

After two dry years in the Russian IPO market – share issues are about to come flooding back.
Tom Blackwell, Senior Vice President of communications company PBN, says 2010 may be the best year since 2007 when 33 Russian and CIS companies sold shares.

“You could see a lot of momentum created very quickly if the next 2-3 deals are a success because there're another 35 companies waiting in the wings to come to the market. “

But those plans are complicated by tough rules requiring most shares sold via IPOs to be listed on either the MICEX or RTS stock exchanges in Moscow, which boosts trading volumes on local bourses but limits the appeal for international investors.

“According to Russian laws only Russian companies can be traded directly. Western or global players must work through Russian firms,” says Sergey Golovanev, Head of Indices and Market Data at RTS.

That's why many companies that want to raise money by issuing shares to foreign investors do so by issuing them abroad, explains Blackwell.

“You've seen in the past Pyaterochka, Evraz, Rusal and other companies have chosen to list entirely abroad through structures registered outside of Russia. I think you could continue to see that happen as the restrictions get more intense."

President Medvedev says he wants Moscow to become a global financial centre. But Russia's regulatory regime will need a lot of reform, before it investors see Moscow as a true rival to London, Hong Kong or Amsterdam.