Director of Equity Financing, FINAM Investment Company, Moscow
Is the NASDAQ considering setting up an affiliated exchange in St. Petersburg?
Last week Russia's business media reported more exciting changes in the Russian IPO market. I have mentioned before how at the recent Third Annual IPO Congress, we received many suggestions from representatives about which foreign exchange is the best market for listing Russian IPOs. The real sign of growth here in Russia is that Russian companies now get to choose.
Last week saw more Russian business media reports about the mysterious new IXSP stock exchange. This time, the source was Russia's Kommersant business newspaper, which discussed the possible acquisition of OMX by the NASDAQ.
Click on the extended post to read more.
When it comes to listing new Russian IPOs, London is still king - for now
Maybe Kommersant's reporters have their own confidential sources, but the rest of the Russian news media reported that NASDAQ is just one of several possibilities that are being evaluated by OMX management. Anyway, Kommersant's headline "NASDAQ about to enter Russian market" grabbed a lot of attention, but I think that it is still removed from reality.
"Nasdaq, one of the world's largest stock exchanges, plans to buy Scandinavian stock exchange group OMX for 23 billion Swedish krona (about $3.3 billion). Late March, OMX announced it was establishing a new international bourse, International Exchange St. Petersburg, together with its St. Petersburg counterpart. If the deal goes through, IXSP will be set up with direct American participation, and Nasdaq will become the first major Western exchange to have a presence in Russia."
Who knows, maybe this report is true, but my discussions with some experts indicate that none of them believes it.
At the end of last week there were two interesting articles published on different subjects.
London Remains the Preferred Exchange for Russian IPOs
First, RBC Daily published commentary by the Russian finance website Quote.ru. The article, titled "Russian companies are accustomed to LSE", declaring that "The London Stock Exchange still remains the beloved floor for listings of Russian companies". However, the author of this article thinks that the recent FSA initiatives to review requirements for foreign listings may result in a transatlantic shift of preferences. Quoting unnamed experts, Quote.ru states that the focus for Russian companies may be shifting to domestic stock markets, the MICEX and RTS. The article also claims that U.S. markets could become more accessible for Russian listings.
The article cites Alfa Bank analysts to support the idea that Russian companies may soon prefer domestic exchanges to the LSE. Everyone understands that this is still a hypothetical transition, and that neither the MICEX nor the RTS can be compared to London's venerable exchange. However, we have seen a lot of changes happening of late in Russian markets that were previously unthinkable.
The second noteworthy article, "America calls investors for IPO" was in Friday's Kommersant daily. This basically discussed the FRS announcement that there is a re-haul of the IPO listing rules going on. The article speculates that U.S. authorities may take advantage of the tightening of rules in London to entice more issuers to New York.
Renaissance Capital Acquires One of Africa's Oldest Stock Brokerages
Russia's banking sector is witnessing profound changes. Just a few days ago, I wrote about the largest announced transaction, the acquisition of Russia's ABSOLUT bank by foreign investors. Furthermore, some rather unusual news in Russia's finance sector comes to us this week from Africa. Russian finance firm Renaissance Capital is reportedly in the process of establishing a heavily-capitalized investment bank in Nairobi, Kenya.
Nairobi's Stock Exchange
The first step in this process for Renaissance is placing a bid to purchase Francis Thuo and Partners, the oldest stock brokerage in Kenya. More of this exciting news is scheduled to be released next Monday at a special press conference that Renaissance Capital has scheduled in London.
More Russian Banks on the RTS Board
Meanwhile, Russia's IPO drive is gaining momentum. During the last two months the RTS announced that 9 banks were added to the RTS Board list. These are basically smaller regional banks, but there are some bigger banks as well. It is interesting to note that in 2006, only one bank was included into RTS Board.
Ranking Russia's Top Five Brokerage Firms - FINAM No. 2 in Q1 2007
The Russian stock market continues to push forward. This week RBC published Q1-2007 rating of stock brokers. Although the general trading activity this quarter was low, seven companies exceeded $10 billion in trading turnover (last year there was only one). To put these trading volumes in perspective, here is a list of the Top 5 broker/dealers in Russia
All amounts in billions of U.S. dollars:
1. BrokerCreditService - 34,030.55
2. FINAM Investment Company - 32,166.93
3. Troika Dialog - 20,462.71
4. Otkrytije - 18,208.73
5. Alor Invest - 15,490.63
UK-based Insurer Aviva Returns to Russia
Aviva, the world's fifth-largest insurer and the largest insurance company in Great Britain, is resuming operations in Russia after a 90 year hiatus. The company's plans are ambitious -- to hire 5,000 direct sales staff, to capture 10% of the Russian market and to become a Top 5 insurer in Russia. It is noteworthy that the company plans "to provide whatever capital is necessary to finance the growth program".
In its press-release, the company states that "to meet the considerable demand growth for employee benefits, including employer-administered voluntary pension plans in Russia, the company has established an Aviva "Non-State Pension Fund." This is an unusual move for a foreign insurer, and rather challenging. We will be watching their efforts closely..
Otkrytije Acquires London Stock Exchange Member ABC Financial Services
Moscow's Otkrytije investment bank acquired 100% of the ABC financial services firm following a deal for an undisclosed amount with Compagnie Financiere Tradition (CFT), one of the three largest money brokers in the world. ABC is a member of the London Stock Exchange and this acquisition is viewed as an attempt by the Moscow company to provide its clients access to the global market. As it turns out there are some other, less expensive ways to do this -- BrokerCreditService provides its clients this access working directly from their terminals.
Russia's Pharmacy Chain 36.6 Announces Joint Venture
Far from being content to just sell oil & gas and minerals, the new Russian business mentality is to diversify into new areas. Last weekend it was reported that Pharmacy chain 36.6 has formed a Joint Venture with a number of players in the Russian financial market. The goal of JV is to buy medical assets (retail chains and medical services providers) in Russia. This financial group, led by Standard Bank, will contribute $85 million and the 36.6 Pharmacy Chain - 24.99% of the equity capital in its Veropharm subsidiary. Market experts consider this to be an extremely smart move. Pharmacy Chain 36.6 urgently needed about $205 million for its development and market analysts thought that Veropharm would be sold. By creating a new joint venture, the owners of the 36.6 Chain have managed to attract new assets to their business without having to pay for them up front.
Public Opinion Survey Released on Another "People's IPO" - Vneshtorbank
The Russian Public Opinion Foundation released the results of a poll it had conducted in 100 cities across Russia (about 1,500 adults) regarding the Vneshtorbank's "popular IPO". This is the third Russian company campaign that has been labeled with this tag. Here is a brief synopsis:
- 20% know about VTB;
41% - "have heard something about it";
37% - the poll question was the first time they had heard about the bank
- 11% have heard about VTB's IPO and 13% "have heard something about it"
- 8% think that this is a government-owned bank; 16% - it is private; 26% - a private bank with government participation
- 12% think that "it is feasible for them to buy some VTB equity"
- 20% think that the VTB shareholders will get some profit within 2-3 years (for Sberbank, this number was 22%);
13% think that the owners will lose money (for Sberbank 11%);
20% consider that the shareholders will break even, with no profits and no losses (21% for Sberbank)
In general, as the results of the poll show, the share of respondents who think that they will acquire equity in a Russian company is:
- Today 39%
- Winter 2007 -- 33%
- Summer of 2008 -- 31%
Russian-Israeli billionaire Lev Leviev will issue an IPO in London for his real estate holding company
Photo by: Forbes
Week New IPO Candidates - Week 17 of 2007
-Burovaya Kompania Evrasia (BKE, formerly known as Lukoil Burenie), an oil and gas service company -- plans a London IPO for October-November 2007
- Russia's Dixy Foods retail chain plans an IPO in May 2007, to raise $350-$450 million from the sale of existing and new shares.
-Africa Israel Development, a company owned by Israeli-Russian diamond billionaire Lev Leviev, will issue an IPO next month for 19% of the shares in its Russia real estate subsidiary.
-Renova's Zoloty Kamchatki (Kamchatka Gold) -- a Russian Far East mining company - is considering an IPO in London.
-Gross Plants, a Russian vodka producer -- plans an IPO for 2009
-RTM, a leading commercial real estate developer -- will issue an IPO by mid-year on the RTS
-Summa Telecom, a Russian WiMAX telecom carrier -- IPO in the next 2 to 3 years
-Kujbyshevazot, producer of nitrogen fertilizers -- will issue an IPO during the second half of 2007 in Russia
Finally - Billboard Comes to Russia!
Today I saw the first issue of Russian version of Billboard magazine on the newsstand. At last, we are finally joining the civilized world!
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and do not necessarily reflect the views of the FINAM Investment Company. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.