Russian Firms Flock to U.S. IPOs

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"MOSCOW -- Health-food provider JSC VkusVill and stock exchange PJSC SPB Exchange are preparing for initial public offerings in the U.S. this year or early next, according to people familiar with the companies, the latest in a string of Russian corporations joining the global IPO rush.

This year is shaping up to be the one of the most active for share sales since Moscow was slapped with international sanctions in 2014. Record-hitting stock markets abroad and an improving economy at home, helped by rising oil prices, have smoothed the path for some companies.

Geopolitics is another key factor contributing to the Russian IPO renaissance.

Though relations between the U.S. and Russia remain near their lowest since the Cold War, the summit in June between President Biden and his Russian counterpart, Vladimir Putin, alleviated some market concerns about tough new sanctions, investors say.

"The environment is quite conducive right now," Viktor Szabo, an investment director at Aberdeen Standard Investments in London. "Growth has been stable and tensions with the U.S. appear to have eased."

So far in 2021, Russian companies have issued around $6 billion in stock, the largest volume in five years, according to VTB Capital, the investment-banking arm of Russia's second-biggest lender. The retail investing boom in Russia has also helped juice up the market.

"2021 feels very much like it may outshine the figures of 2014," said Alex Metherell, co-head of global banking at VTB Capital.

Major Russian IPOs this year include discount retailer Fix Price Group, which listed in London in March, and private health clinic operator European Medical Centre EMC and forestry group Segezha Group PAO, which both listed in Moscow. Ozon Group, one of Russia's biggest online retailers, raised $1 billion from its New York share listing in November.

That is still a drop in the bucket compared with the overall market.

This year, 282 companies have raised over $104 billion on U.S. exchanges through traditional IPOs, the highest volume on record year to date, according to Dealogic, helped by gains in equity markets and global economic recovery.

"Russian companies have always been keen followers of developed markets, and now they see an opening," said Alina Sychova, Moscow-based head of capital markets origination at brokerage Sova Capital.

VkusVill, a Russian version of multinational chain Whole Foods, is expected to confidentially file paperwork soon for an IPO in the U.S. this year or early next with a dual listing in Moscow, according to people familiar with the company's plans.

VkusVill is expected to be valued in the range of $3 billion to $5 billion, the people said.

The company works with local producers to offer healthy food via a chain of shops and an e-grocery delivery service. VkusVill declined to comment.

SPB Exchange has already confidentially filed paperwork with the U.S. Securities and Exchange Commission and is expected to be valued at around $2 billion, according to people familiar with the process. SPB Exchange declined to comment.

The exchange, which specializes in offering access to domestic investors to trade Apple Inc., Tesla Inc. and other global stocks, is experiencing an individual investor boom.

The number of active accounts almost tripled to over 850,000 in August compared with the same month last year.

The companies will join Russian corporations trading in New York, including tech giant Yandex NV, online recruitment platform Headhunter Group PLC and Mobile TeleSystems PJSC, the country's biggest mobile operator.

Following Russia's 2014 invasion of Crimea in Ukraine, Washington slapped successive rounds of sanctions on Moscow.

In April, the U.S. announced measures that bar banks and institutional investors from buying new Russian government ruble-denominated bonds at auction in response to the country's alleged cyberattacks and election interference -- actions that Moscow denies. The sanctions were seen by investors as limited in scope." [1]

1. Russian Firms Flock to U.S. IPOs
Kantchev, Georgi.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 08 Sep 2021: B.11.