NYSE sees chance as Russia reforms spark listings tussle

April 18, 2013


London’s dominant position for Russian IPOs could come under threat from other international as well as domestic exchanges as Russia moves forward with financial reform, said participants in Sberbank’s Russia Forum this week.

If those changes encourage Russian companies to move towards domestic listings, the US for example, could find competitive advantage in its geographic distance and diverse investor base.

“There is a shift occurring, as progress is made on reform, that will compel people to do more business in Moscow,” said Albert Ganyushin, head of international listings at NYSE Euronext. “That will mean that Europe’s proximity to Russia could be less of an attraction for Russian issuers.

“As an alternative, we can give access to a deeper, more liquid US market, with more IPO execution certainty, as well as cross listing on our highly liquid European market.”

A US listing could complement a domestic one in ways that London listings cannot — giving access to a broader and more sophisticated investor base, for example, alongside a Moscow line, he said.

“Our view is that Russian companies should list locally, and use a listing in New York to complement that,” said Ganyushin, speaking from Sberbank’s Russia Forum in Moscow. “We don’t position our US markets in competition with the local market.

That fits with the desire of many Russian issuers for more of their shares trade domestically.

“Unfortunately right now the biggest liquidity in our stock is the GDR listing in London,” said Maxim Volkov, chief executive at PhosAgro, which recently completed a $470m ABB that saw strong participation from foreign investors. “But being a Russian company, we would of course prefer the liquidity to be in Russia.”

But to make the most of that shift, the NYSE — and the Moscow Exchange — have a lot of catching up to do. The London Stock Exchange saw 43% of Russian IPO volume since January 2010. Two of the three large Russian deals of the last year, MegaFon and MD Medical Group, were listed at least partly in London GDRs. The Moscow Exchange’s float on its own platform was the only other Russian IPO in the last twelve months.

The LSE – which depends on those Russian listings for a large part of its international business – sees a move towards international listings, too.

“In 10 years’ time do I think that companies will be re-domiciling to the UK and listing shares here, which is what domestic policy in those markets is currently pushing them to do?” Alastair Walmsley, head of primary markets at the London Stock Exchange, told EuroWeek last year. “Perhaps not. But we see upside in it from both perspectives, with two complementary pools of capital.

“Co-operation is a more beneficial route than protectionism and London to Moscow relations are exceptionally strong.”

Before any shift towards Moscow happens, the financial reforms – the timescale of which remains unclear, though progress has been made recently – need to be pushed through.

The lack of visibility on those reforms continues to exert pressure on Russian share prices, and was blamed by some in the market for the poor performance of the Moscow Exchange’s IPO in February, which priced at the bottom of the range and has lost 22% of its value since listing.

“Russian stocks have great potential, but companies are severely undervalued,” said Volkov. “But the types of fears that have caused that don’t have any fundamental base, so we see them passing.”