February 2, 2012 / 4:25 PM / 7 years ago

UPDATE 1-Russia's Putin orders VTB to compensate small investors

* Shares trading at 7.2 kopecks, just over half of IPO price

* Putin orders buy back for small investors at IPO price

* May cost 15-18 bln rbls - VTB CEO

By Katya Golubkova

MOSCOW, Feb 2 (Reuters) - Russian Prime Minister Vladimir Putin, running in a presidential election in March, on Thursday instructed the country’s No.2 bank VTB to compensate small investors who lost money in its stock market flotation.

Shares in VTB, which is still 75.5 percent owned by the government, are trading at around 7 kopecks, just over half the price of 13.6 kopecks at which they were floated in 2007 when over 100,000 Russian small investors bought the stock.

Minority shareholders who bought into the ‘people’s IPO’, many of them first-time investors, lost out when VTB’s share price was hit by the 2008 crash and again in the ill-fated takeover of Bank of Moscow, which led to a $14 billion bailout.

Putin, answering a question at an investor conference, offered to buy back VTB’s shares at the original issue price.

“I can instruct the bank’s management to work out a plan to buy back these shares so that you do not suffer any losses,” Putin said.

“Citizens should know that we will do everything possible to ensure that they do not have any losses. We are ready to make available the necessary funds.”

Clarifying Putin’s comments, his spokesman said the government was not planning compensatory buybacks at other state-controlled companies whose share prices are below the level at which they were floated.


A buyback, if it proceeds, will only reimburse small investors. Andrei Kostin, VTB chief executive, said that buying back shares from 100-110,000 investors would cost around 15-18 billion roubles ($500-$600 million).

He said he would report to Putin by Monday on how best to conduct the buyback. VTB’s press office confirmed it had received Putin’s order to look into a way of buying back the shares.

“The bank will study all the aspects of the following instructions and will provide a report to the Russian government,” it added, declining to give any details on the terms of the possible buyback.

VTB last conducted a public share placement in February 2011, raising $3.3 billion via the sale of a 10 percent stake with each share costing 9.15 kopecks.

Putin’s statement pushed VTB’s shares up by 3 percent, but they later fell back as traders realised that institutional investors would likely not be included in the buyback.

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