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9 In 10 Russian & CIS Listed Companies Worth Less Today Than At IPO
added: 2009-03-05

Following a disastrous year for the capital markets, only 8 of 92 companies from Russia and the CIS finished the year with a higher market capitalization than at their time of listing. This is according to IPO Pioneers 4, an annual report released by The PBN Company, a strategic and financial communications consultancy.

"Not only did 2008 fall well short of expectations in terms of CIS IPO activity, it also saw most of the value created over the past 12 years disappear," said Peter Necarsulmer, Chairman & CEO of The PBN Company. "Unfortunately, given current market conditions, we are unlikely to see this value begin to re-generate before 2010."

Vimpelcom, the first ever IPO from the region, has created and retained the most value since its NYSE listing in 1996 – up 1,066%. The other 7 companies with an increase in market capitalization were Open Investments at 456%, Mobile TeleSystems at 407%, Lebedyansky at 93%, Wimm-Bill-Dann at 40%, Pyaterochka (X5 Retail) at 17%, Novorossiysk Commercial Sea Port at 14%, and Novatek at 6%.

"With the lowest level of IPO activity since 2004, 2008 certainly stands in stark contrast to 2007, which saw 4 different companies – PIK Group, ENRC, VTB and Sberbank – each raise more capital individually than 2008’s combined total," said Necarsulmer.

"The question today is whether 2009 will be known as ‘the Year of the IPØ?’," said Necarsulmer. "We think that is a real possibility, but hope to be proven wrong."

The report profiles all the IPOs from Russia and the CIS in 2008, and analyzes the performance of the 92 IPOs since Vimpelcom’s pioneering flotation in 1996. Key highlights from the report reveal:

- Deals hit record lows in 2008 – only 7 companies from the CIS conducted IPOs in 2008, raising only $1.7bn, compared to 33 IPOs raising $34.3bn in 2007.

- 37 postponed & 11 cancelled flotations – a total of 48 companies withdrew their projected IPO plans due to market conditions.

- Flotations from consumer industries sustained their performance – the combined market capitalization of consumer companies increased by 0.6% from listing to the end of 2008, compared to decreases of 53% for energy companies, 58% for mining and heavy industry, 74% for agriculture, 78% for banking & finance, and 91% for real estate.

- Kazakh flotations most resilient in relative terms – since listing, the combined market capitalization of Kazakh companies fell by 50%, compared to 60% for Russian companies and 70% for Ukrainian companies.

- Renewed focus on London as the venue of choice – for those companies that braved the market in 2008, 73% of funds were raised by listing either on the London Stock Exchange Main Market or Alternative Investment Market.

The report lists over 125 Russian and CIS companies that The PBN Company has identified as considering initial flotations, subject to market conditions.

"When the equity markets eventually open back up, investors will be much more fastidious and demanding in their assessment of Russian and CIS companies," Necarsulmer said. "Companies will need to use this time to put their houses in good order, so they are able to present a compelling, competitive investment case to win over increasingly wary investors."

Source: Business Wire

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