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IPOs: We need to talk about Russia

Two successful IPOs should have been good news for the country’s markets – if anyone had bothered to tell the world more about them.

More than 20 years after embracing the free market, Russian companies remain notoriously ambivalent about PR. Many still seem to view it as the corporate equivalent of a Gucci handbag – a stylish and desirable but ultimately nonessential accessory. 

, have a tendency to disengage from the media process at the first sign of trouble in a way that is both misguided and shortsighted. Not only does it make the task of reengaging with the media when things pick up more difficult, it also encourages the spread of misinformation. The recent IPOs of Uniwagon and Credit Bank of Moscow are a case in point. Both deals have been branded ‘bogus’ by western equity bankers, on the claims that both were marketed exclusively to Russian investors and both stocks have shown limited secondary market liquidity. There have been hints of collusion between like-minded oligarchs and even of misuse of pension funds. 

Yet on paper there is nothing inherently suspicious about these listings. Both are well-run companies with decent track records. They are not in sectors currently in favour with global fund managers – but that would explain the focus on a domestic buyer base. Both had several large anchor orders, but that is a feature of IPOs in any market – and the fact that pension funds were involved is hardly surprising, given that the rules regarding their investment in equities have been relaxed recently.

Difficult market

What is more, even if the investor base for these deals was relatively limited, the fact remains that both companies have raised much-needed capital in a very difficult market. They have also committed to meeting the reporting and governance requirements for listed companies, which will make it quicker and easier for them to attract new investors – domestic or international – if and when market conditions improve.

Further reading


Russia: special focus

Why, then, have these deals attracted such opprobrium? Partly, of course, there is the undeniable fact that bankers are rarely happier than when rubbishing their rivals’ deals. It is also true that the default setting of most participants in the Russian market is a healthy – and not unjustified – cynicism. 

It is precisely this attitude, however, that makes it all the more important for banks and issuers to be upfront about their dealings. By failing to engage with the market and the media, as those involved in the recent Moscow IPOs have done, they leave an information gap that will inevitably be filled with innuendo, gossip and rumour – none of which is likely to be complimentary.

In the short term, while Russia is shut out of global markets, this may not seem to matter much. In the long run, however, it risks damaging the reputation of all those involved: banks, issuers, the Moscow Exchange and the Russian market as a whole.

Information is what markets are all about, in bad times as well as good. Western firms learned that lesson decades ago – Russian ones would do well to follow their example.

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