Russian IPOs Face Tough Environment
2011-05-27 10:08:30
What do Yandex N.V., Russia’s most popular search engine, and OAO Syktyvkar Tissue Group, Russia’s third-largest toilet paper maker, have in common?
The companies, which may well have the same customers, have been planning to price shares for their respective IPOs this week. Yandex’s Nasdaq placement was hugely successful, raising $1.3 billion, while the toilet maker’s Moscow IPO failed due to a lack of demand.
Russian companies have found it tough to find investors lately. It’s not just that stocks are falling out of favor. Foreign investors are also becoming increasingly sensitive to political uncertainty ahead of Russia’s presidential elections in 2012. What’s more, lacking ruble liquidity has pushed local investors to start selling their current holdings, all the while showing little interest in buying new stocks.
Russian Helicopters, a state-run helicopter maker, scrapped its IPO in London and Moscow; mobile phone retailer Euroset N.V. canceled its placement on the London Stock Exchange; and tubes and pipes producer ChelPipe decided against a second attempt to place its shares in London.
“Investors loved the Syktyvkar Tissue stock because the business model is crystal clear,” Maxim Dryomin, deputy chief executive at Alor Invest, one of the IPO organizers says. “However, they asked us to postpone the placement until the fall because they were worried they won’t be able to sell the shares if the market keeps on falling.”
Mr. Dryomin says there was some demand for shares of Syvtyvkar Tissue, which mainly came from Russian banks and private individuals, but it wasn’t enough to grant a successful IPO.
Yandex, in contrast, didn’t include Moscow in its roadshow, preferring to focus on U.S. and European funds specializing in hi-tech companies. The search-engine company saw its books more than 10 times oversubscribed, which helped the underwriters price the shares at $25, above the initially set price range of $20 to $22.
However, Syktyvkar Tissue, which had planned to raise between RUB550 million ($19.4 million) and RUB700 million on selling up to 30% of its shares on Micex, didn’t seem to be put down by its IPO failure. The company said it is still on track to implement its RUB2.2 billion investment program, which aims to double its production capacities by 2014, and increase its market share to 15% from 8%.