Tatneft changes American receipts for shares

Automatic delisting from August 15

Tatneft has started converting American depositary receipts into ordinary shares. As follows from the company's message, Tatneft itself initiated the exclusion of ADR (American depositary receipts) from circulation on the global platform, launching the automatic conversion of ADR into ordinary shares of the company.

Tatneft will initiate automatic conversion of ADR (depositary receipts) into ordinary shares and will also send a notification to the depositary," the company said in a statement published on the website of the London Stock Exchange.

At the same time, the company warned that it intends to withdraw ADR from circulation automatically, without going through conciliation procedures, and will limit itself to sending a notification to the depository.

“The company does not plan to apply for permission not to automatically convert its depositary receipts. As a consequence, on August 15, 2022 or so, the company will send a notification to the depository, initiating automatic conversion," Tatneft said in a statement.

Such notification is connected with the adoption at the end of June of amendments to the April law banning the placement of Russian DRS on foreign exchanges and delisting of existing ones. “Automatic conversion is carried out in the interests of Russian investors, and we have no reason to prevent this. At the same time, ADR holders bear certain obligations stipulated by the depository agreement," Tatneft explained. The depository of the ADR programme has been Citibank since February 18, 2021.

“Automatic conversion procedure has nothing to do with the listing. In accordance with this procedure, ADRs that are stored on the owners' accounts in the depositories of the Russian Federation (these are mainly Russian investors) will be automatically converted into ordinary shares. The remaining ADRs continue to exist. This procedure is provided for all issuers of depositary receipts, not only Tatneft," Tatneft explained.

The fact of disclosure through the exchange is connected only with the fact that the company retains a listing in the UK, Tatneft clarified.

Liquidity of Tatneft's shares will be concentrated on the Moscow Stock Exchange

Tatneft launched the ADR programme in 1998. A year ago, it was reported that 26,77% of the company's ordinary shares were deposited for conversion to ADR. But at the moment, their share has remained minimal.

“We do not have accurate information about the percentage of ADRs that are subject to automatic conversion, but it is most likely not a very large number (those that are accounted for in Russian depositories)," Tatneft explained to Realnoe Vremya.

“The liquidity of Tatneft's shares will be concentrated on the Moscow Stock Exchange — this will allow us to focus trade in Russia, which is convenient for Russian retail investors. Minus — less stringent rules for disclosure of information, less overall liquidity in Russia compared to international," said investment strategist of the Arikapital Management Company Sergey Suverov.

Managing Director of IC Ivolga Capital Dmitry Alexandrov noted that only receipts that were accounted for in the Russian depository would be subject to automatic conversion. “The remaining receipts, which are accounted for by foreign depositories, will continue to be traded on the London Stock Exchange," he explained.

How can this affect the capitalisation of the company? “Probably, some of the investors who will get access to the securities will decide to sell them, but it is unlikely that we will see a significant impact on the price. Information about dividends, which will also appear on August 15, will have a stronger impact," Alexandrov believes.

On April 16 of this year, Russian President Vladimir Putin signed a law prohibiting the placement of depositary receipts for securities of Russian companies on foreign platforms. At the same time, issuers can keep the depositary receipt programmes in case of permission from the government commission. Currently, NOVATEK and Norilsk Nickel have received permission to maintain the depositary receipt programme.

In May, Tatneft PJSC also obtained a permission to continue the American Depositary Receipts (ADR) programme abroad. The company stated this in a message posted on the London Stock Exchange.

Luiza Ignatyeva

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