''I don’t think market conditions are favourable''
This year will become the first in a decade without a single Russian IPO
None of Russian companies that planned initial public offerings (IPOs) in 2018 have implemented their plans due to sanctions, emerging markets turmoil and increasing US interest rates. Analysts say that some of the postponed IPO transactions can materialise next year, but the outlook remains clouded.
Russia hopes for IPO renaissance after the worst year in a decade, says Reuters. At least ten Russian companies including SIBUR petrochemicals giant and RESO insurance company were planning IPOs this year in Moscow and London, but none of the plans have come to pass. Nonetheless, sources and bankers claim that companies remain committed to planned stock market listings in 2019.
According to Alina Sychova, the head of capital markets origination at Sova Capital, there will be no IPOs for the rest of the year. ''I know there are a few names looking at the first-quarter: they are going to be monitoring the situation in terms of sanctions, Brexit and overall market volatility,'' she said. ''Quite a lot of companies continue to study the market or prepare to tap it… If the markets reverse, they could be ready in four to eight months,'' confirmed Dmitry Brodsky, the head of equity capital markets for Russia and CIS at Renaissance Capital.
In 2017, Russian companies raised about $8 billion from public equity sales, about $3 billion of which was from IPOs. However, the Russian stock market was hit hard by US sanctions this April. For example, Globaltruck haulage company raised 3,85 billion rubles ($59 million) via its Moscow IPO last November, but now its shares are trading 22% lower than their offer price. IBS IT service company postponed its Moscow IPO immediately after the sanctions announcement in April because of financial market volatility. Only a few companies held secondary share offerings in 2018, says Reuters.
''I don't think market conditions are favourable,'' said an executive at another company that has planned an IPO this year. ''There's concern about the political situation, consumer confidence, budget, oil prices. It's just volatile and that's worrying for everybody,'' he explained.
At the same time, any positive trend in resolving geopolitical issues can trigger an increase in market activity thanks to unfulfilled demand, considers Boris Kvasov, an executive director for equity capital markets at VTB Capital. The market needs a certain time to adjust and find a balance, but a lot of IPO transactions are in the stage of preparation and can materialise next year, according to Kvasov.None of Russian companies that planned initial public offerings (IPOs) in 2018 have implemented their plans due to sanctions, emerging markets turmoil and increasing US interest rates. Analysts say that some of the postponed IPO transactions can materialise next year, but the outlook remains clouded.