As the Russian economy continues to emerge from the coronavirus, and as long as investors are hungry for new issues from Russia, it’s likely there will be more IPOs by Russian companies: but likely more in London than New York.
The largest initial public offering by a Russian company since 2014 hit the London Stock Exchange (LSE) early last month when retailer Fix Price raised $2 billion through a share sale. The offering, at the top of the target range and the largest ever for a Russian retailer, valued the company at $8.3 billion.
Fix Price, which calls itself the “fastest growing value retailer” in the world, was one of the first discount retailers in Russia. Founded in 2007, it sells low-priced goods; its most expensive items sell for the equivalent of just $3.40 in its 4,200 brick-and-mortar shops and online. The company’s low-price format has benefited from the weak performance of the Russian economy, which has grown by an average of just 0.4% per year since 2013.
Fix Price’s choice of the LSE over New York is consistent with its compatriots. New York was the prior venue of choice for big Russian companies going public, but over the past seven years, all but two Russian IPOs have been launched on the LSE.
After the early 2014 annexation of Crimea from Ukraine, the US imposed a flurry of sanctions on Russia, some of which were echoed by the EU. More recently, perceived political risk in Russia rose over the alleged poisoning and subsequent imprisonment of Kremlin critic Alexei Navalny. Under the new Biden administration, tensions thus far have not eased.
For Russian issuers, then, the possibility of further sanctions is a persistent risk to valuations. One way to reduce the possibility of wbecoming collateral damage is to list in London, which generally has taken a softer stand than Washington with the Kremlin.
As the Russian economy continues to emerge from the coronavirus, and as long as investors are hungry for new issues from Russia, it’s likely there will be more IPOs by Russian companies: but likely more in London than New York.
