IPO Trend Continues Growth
OREANDA-NEWS. April 23, 2010. Four firms from Russia and Ukraine pressed ahead with share offerings to raise up to USD2 billion, with two lowering valuations following weak demand for a placement last week and a fall in share prices.
Dozens of Russian companies plan initial public offerings this year, seeking to replenish their coffers after a recession and enabling their owners to lock in profits.
Some investors are predicting that the total raised could exceed USD 20 billion, approaching the record levels seen in 2007.
The rush started with a USD 2.2 billion Hong Kong IPO by United Company RusAl, the world's top aluminum producer, in January, followed by a USD 90 million IPO of seafood firm Russian Sea last week, which drew weak demand from investors.
On Monday, fertilizer company UralChem said it wanted to raise USD 496 million to USD 642 million, steam coal company Kuzbass Fuel Company USD 295 million to USD 398 million, developer LSR up to USD 773 million and Ukrainian egg producer Avangard USD 198 million to USD 256 million.
Together with drug distributor Protek, which started a roadshow last week to raise up to USD 400 million, the total sum raised by Russian firms could exceed USD 4.5 billion so far this year.
"There has been a long drought of Russian placements, so it is a delayed offer of some sort," said Ivan Mazalov at Prosperity Capital Management, wh ere he helps manage USD4.1 billion worth of Russian assets.
"The choice is very big, the ranges are good and the appetite is there," said Mazalov, who does not rule out bidding for some of the four stocks. "The next placement will depend on the market and, if it gets weaker, people will wait with placements."
Emerging stocks fell more than 2 percent on Monday, heading for their largest one-day drop since Feb. 5, as investors became risk-averse, fretting about last week's U.S. data and U.S. regulator Securities and Exchange Commission's fraud charge against Goldman Sachs.
The stock market fall, combined with the weak placement by Russian Sea and sour memories from United Company RusAl's placement, when the stock plunged by more than 10 percent at the start of trading, have likely weighed on companies, bringing down their initial valuations.
UralChem said it would be valued at USD 1.2 billion to USD 1.6 billion post-IPO versus an initial estimate of USD 1.5 billion. KTK valued itself at USD 945 million to USD 1.276 billion post-IPO versus the initial USD 1.0 billion to USD 1.4 billion.
LSR set its secondary placement price range at USD 10 to USD 11 per GDR — in line with the market — and Avangard said it wanted to raise USD 198 million to USD 256 million — in line with an initial USD 200 million estimate.
None of the share issues will directly generate new personal wealth, unlike in 2007, when a string of Russian IPOs created dozens of new billionaires.
UralChem will use the proceeds to repay massive debts, and LSR will repay debt and invest in new projects, while KTK and Avangard will expand and modernize equipment.
Russia's highest-profile IPO to date this year, by United Company RusAl, was meant purely to help the firm repay debts.
The only businessman who has received a big lump sum was Maxim Vorobyov, the main owner of Russian Sea, although he did not get as much as planned. After the firm sold fewer shares than expected, he decided to take USD 25 million instead of USD 100 million.
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