Nordgold cancellation rattles resurgent Russian IPO market

LONDON (Reuters) -A decision by gold producer Nordgold to postpone a potentially multi-billion London debut has raised the prospect the fastest flurry of Russian stock-market listings under the sanctions era has run its course.

Six months into the year, Russian Initial Public Offerings (IPOs) have hit the highest level since western sanctions were introduced on Moscow, securing companies more than $2.4 billion in total, Reuters calculations have found - more than in any single full year since 2013.

In recent months, Russian forestry group Segezha and low-cost retailer Fix Price have listed after a New York debut by online rival Ozon late last year.

Ozon has jumped more than 40% since its November launch, although Fix Price in London and Segezha on the Moscow exchange have both suffered losses following their IPOs in March and April respectively.

Projections by UBS earlier this year suggested listing volumes could hit $10 billion by the year-end as Russia joins in a bonanza that has lifted stock market debuts to record levels around the globe.

On Monday, Russian private health clinic operator European Medical Centre announced Moscow IPO plans which financial market sources earlier estimated could bring around $500 million.

Retailer Familia is considering a U.S. IPO, sources have said, while state-owned Otkritie bank has said it is aiming for a 2022 debut.

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But Norgold’s decision last week to postpone its IPO could make firms think again.

Globally, IPOs have shown signs of investors fatigue. On top of that, Russian investors heed the risk of current or prospective sanctions.

Boris Kvasov, co-head of equity markets department at VTB Capital, however, said the focus had shifted to fundamentals rather than sanctions.

“Russian IPOs still remain quite specific and require bigger efforts in regards to marketing to potential investors, so they are comfortable to invest into a new story,” Kvasov said.


In post-Soviet times, Russia’s IPO market promised great wealth as state assets were privatised and listed.

In 2006, top oil company Rosneft raised $10.7 billion from its London and Moscow floating. In 2007, state-owned lenders Sberbank and VTB each raised $8 billion or more.

Even after this wave finished, Russia featured high on international league tables, with annual volumes topping $4 billion.

As throughout Europe, volumes dropped in 2012 and 2013. But unlike elsewhere, Russia did not spring back to life as Western capitals imposed sanctions on Moscow over its 2014 seizure of Crimea and sharp oil price falls in 2014 and 2015 added to the pressure.

Investors are now more used to navigating sanctions.

“A lot of very competitive companies are based out of Russia, especially in the field of energy,” said Chetan Sehgal, lead portfolio manager of Templeton Emerging Markets Investment Trust, which is overweight Russian equities.

The new U.S. administration of President Joe Biden imposed sanctions on Russia for interfering in the last U.S. election; yet looked to avoid deeper deterioration in U.S.-Russian ties, leaving room for cooperation.

Sehgal said his firm tried not to predict the trajectory of sanctions, but instead to focus on individual companies and how they dealt with the political environment.

“They probably have to climb a far steeper staircase as compared to the ordinary companies because they are from Russia, but they are doing a good job,” said Seghal, whose firm has bought into a number of Russian IPOs.

Sanctions have also created a discount to other emerging markets that some find alluring, while others consider it does not make up for the risks.

In March, gold producer GV Gold postponed its IPO, citing a volatile Russian capital markets backdrop after Biden pledged Russian President Vladimir Putin would “pay a price” for election meddling.

Politics aside, some bankers say a rally in the price of Russia’s main export oil, which some analysts predict is heading towards $100 a barrel, can provide a fresh incentive for companies to dive into the IPO market.

One senior banker, who has worked on two Russian IPOs this year, said there was a constructive environment for Russian companies in terms of listings and secondary offers. He declined to be named because he was not authorised to speak to the press on the issue.

Combined with the geopolitical discount, such optimism has made international investors willing to engage and MSCI’s indexes show Russian stocks outpacing emerging markets overall.

“We all live in constant anticipation of new sanctions and this impacts our companies’ valuation both on the market and during IPOs, which is not the case for other developing markets such as Brazil for example,” said a Russian investment banker, who also declined to be named.

“There are investors who simply can’t buy, but there is a lot of cash in markets, and greed outweighs fear.”

Additional reporting by Katya Golubkova; editing by Barbara Lewis, Kirsten Donovan