Sunday, 13 May 2012

IPO postponement raises fears of more to come

.................. The delay of a long-awaited initial public offering by real estate giant O1 Properties has sparked fears of a repeat of the rash of IPO postponements that plagued Russian companies last year. The company, which develops elite office complexes in Moscow, announced in a statement late Thursday that it was postponing its planned issue in London due to “adverse market conditions.” The firm said it might consider returning to the market at some point in the future. The listing was slated to raise around $425 million on the London Stock Exchange, and would have been the largest IPO of a Russian company since last October, according to Bloomberg. It is now the first London offering to be pulled this year. The postponement echoes a string of similar IPO pull-outs from Russian companies this time last year, also due to rocky markets. The spring of 2011 saw the announcement of postponed offerings from several metals and mining companies, followed by Russian Helicopters and Domodedovo Airport. Many had planned to list this year instead, but analysts told The Moscow News that the current market conditions meant it was unlikely they would push forward with plans in the near future. “The same problems remain in place now as last year,” said Yulia Gardeyeva, an analyst at the Troika Dialog investment bank. “It is unlikely that market conditions will improve in the summer because there is still a lot of pressure in the euro zone.” A fresh wave of uncertainty over the peripheral euro zone economies has sent the Russian market tumbling 14 percent since March of this year, causing investors to shy from riskier assets, such as the Russian real estate sector. Tigran Ovanesyan, a real estate analyst at Uralsib investment bank, said the IPO postponement tendency was in part a result of a seasonal change in investor appetite for stocks, which leaves only a small window for companies to complete their offerings. “For a second consecutive year we are seeing an interest in stocks in the first half of the year and then the markets become more risk-averse, so there is a correction in the second half,” Ovanesyan told The Moscow News. “This is in part due to the fact that investors are not willing to buy high-risk stocks just before going on summer leave.” Another problem, analysts said, is that Russian companies have a tendency to value their stocks too high and then pull out of offerings when investors indicate that they are not prepared to cough up. Bucking the trend is the Etalon property group, which floated $500 million of shares at a discount to fund expansion last year, a strategy which Ovanesyan said served the company well, since it allowed it to reinvest the capital into the booming Russian property market. The IPO postponement trend does not bode well for the long list of flotations planned for this year, whose ranks include such giants as Russia’s biggest lender, Sberbank, and its largest cell phone operator, MegaFon. The companies plan to raise $6 billion and $4.7 billion, respectively. But Gardeyeva said the bigger companies will likely be on safer territory due to their size, while smaller firms, such as O1 Properties, are likely to suffer. “In periods of volatility, people usually look for liquidity, and in order for the stock to be liquid, it needs to be a relatively large company with a relatively large free float,” Gardeyeva said. “Most likely it will be the smaller deals that are going to be sidelined again.”

No comments: