Going Public in Russian Securities Market
Going Public in Russian Securities Market
Alexei RybnikovCEOMICEX Stock Exchange
2
IPO for Russian Issuers: Pros and Cons
Benefits of going public– Ability to raise capital rapidly when needed
» acquisition currency» liquid market for the company’s stock» expanding shareholder base
– Strengthening balance sheet to support future growth– Increases valuation (reduces illiquidity premium)
The dark side of IPO– Losing full control of the process – market dictates
final outcome– Underpricing - market price may not reflect true value
of the firm– Focus shift – from long-term to short-term goals
3
Choice of Venue: Issuer Perspective
Factors to consider: Deal size Target investor base Critical mass of liquidity Legislation Cost Story
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Choice of Venue: Issuer Perspective
Factors to consider: Deal size – up to US$ 500 million Target investor base - mix of buy-and-hold
and active traders Critical mass of liquidity – at all times Cost – at issuance and maintenance Story – compelling
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A CRITICAL NEED
Domestic Market
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MICEX Group: the national financial infrastructureSt.-Petersburg
Moscow
N. Novgorod
Novosibirsk
Rostov-on-Don Yekaterinburg Vladivostok
Samara
7
Domestic Market in Figures
MICEX Stock Exchange’s share in Russian stock market turnover exceeds 85%
Turnover in 2005 reached US$ 225,6 bln, 49,2% increase over 2004
Volume of transactions in Jan-Feb 2006 - US$ 69,6 bln, 3,4 times over Jan-Feb 2005
Turnover of Russian stock exchangesin 2003-2006, US$ bln
2003 2004 2005Jan-Feb 2006
MICEX 99.1 151.2 225.6 69.6
RTS 13.3 26.1 36.5 15.8
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MICEX Stock Exchange: Stock Market Up-and-Coming
MICEX SE Market Cap 2004-2006, US$ bln
151,43
273,64
518,22553,36
0
100
200
300
400
500
600
31.12.04 31.12.05 01.02.06 01.03.06
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MICEX Stock Exchange:Liquidity Growth
MICEX SE Average Daily Turnover 2005-2006, US$ bln
0,49
0,71 0,740,84
0,58
0,75 0,770,85
1,30 1,311,20 1,22
1,75
2,19 2,17
0,00
0,50
1,00
1,50
2,00
2,50
Ja
n 0
5
Fe
b 0
5
Ma
r 0
5
Ap
r 0
5
Ma
y 0
5
Ju
n 0
5
Ju
l 0
5
Au
g 0
5
Se
p 0
5
Oc
t 0
5
No
v 0
5
De
c 0
5
Ja
n 0
6
Fe
b 0
6
Ma
r 0
6
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MICEX Stock Exchange:Start in Gazprom
MICEX SE trading volume is over 41% of the total market
0%
20%
40%
60%
80%
100%
23.0
1.20
06
26.0
1.20
06
31.0
1.20
06
03.0
2.20
06
08.0
2.20
06
13.0
2.20
06
16.0
2.20
06
21.0
2.20
06
27.0
2.20
06
02.0
3.20
06
07.0
3.20
06
13.0
3.20
06
RTS OTCRTS exchangeMICEX SE
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Issuers on MICEX Stock Exchange
Issuers on MICEX Stock Exchange
January 1, 2003
January 1, 2004
January 1, 2005
January 1, 2006
March 1, 2006
Total number of issuers
157 225 241 418 461
Issuers of equities
85 91 81 161 185
Issuers of bonds
82 152 179 244 262
Number of issuers on MICEX SE(at begining of the month)
85
91
81
161
185
82
152
179
244
262
0 50 100 150 200 250 300
J anuary2003
J anuary2004
J anuary2005
J anuary2006
March 2006
Equities Bonds
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MICEX Stock Exchange:Investor Base
Type of Investor Number of Investors
(16.03.2006)
Private Investors 130 301
Nonresidents 1 203
Legal Entities 20 208
Institutional Investors 4 752
Total 156 464
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MICEX Stock Exchange: Cash Equities
294 securities of 185 issuers traded
50 equities of 34 issuers listed, including all blue chips
2005 equities trading volume reached US$ 141,8 bln, 30,6% increase over 2004
Volume of transactions with equities in Jan-Feb 2006 - US$ 49,6 bln, 4 times over Jan-Feb 2005
Volume of transactions andMICEX Index
0
10
20
30
40
50
60
IQ2002
2Q 3Q 4Q 1Q2003
2Q 3Q 4Q 1Q2004
2Q 3Q 4Q 1Q2005
2Q 3Q 4Q
bln USD
0
200
400
600
800
1000
1200points
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MICEX Stock Exchange: Corporate and Regional Bonds
375 bonds of 262 issuers traded
US$ 24,2 bln (par value) total outstanding
114 bonds of 67 issuers listed 2005 turnover in bonds
reached US$ 83,8 bln, 2 times over 2004
Volume of transactions with corporate and regional bonds in Jan-Feb 2006 - US$ 20 bln, 2,4 times over Jan-Feb 2005
Par value of outstanding corporate and regional bonds, US$ bln
0
5
10
15
20
25
1Q2002
2Q 3Q 4Q IQ2003
2Q 3Q 4Q 1Q2004
2Q 3Q 4Q 1Q2005
2Q 3Q 4Q
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Corporate Bond Market: Proxy for IPOs
0
1
2
3
4
5
6
7
8
9
10
1H 2002
2H 2002
1H 2003
2H 2003
1H 2004
2H 2004
1H 2005
2H 2005
bln USD
Market value of corporate bonds has grown 6,2 times during 2003-2005
Market value of corporate bonds in Jan-Feb 2006 has increased by 28,1% to 12,3 bln USD
The biggest issuers of bonds (in terms of nominal value): RZhD – 1.17 bln USD Gazprom – 0.89 bln USD Vneshtorgbank – 0.71 bln
USD
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MICEX Stock Exchange Among PeersVolume of trades on equities market
in January 2006 and number of issuers
US$ bln Number of issuers
NYSE 1387.6 1817
NASDAQ 1107.2 2821
London SE 603.4 2753
Tokyo SE 568.7 2325
Euronext 282.8 962
Deutsche Borse 221.4 645
Hong Kong Ex&Cl 60.0 1127
Shanghai SE 27.8 833
MICEX SE 19.7 170
Singapore Ex 12.2 566
Wiener Borse 5.9 91
Warsaw SE 4.9 234
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Russian Legislation & Regulation: Recent Developments (2005-2006)
More issuer & investor friendlyShorter IPO cycle30% ruleRDRTransparencyCorporate GovernanceInvestor ProtectionNational Infrastructure
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Future Prospects
Market is Ready Infrastructure in Place Regulation Inviting Next Steps:
Dual Listings Strategic Cooperation & Partnerships Real Working Mechanisms
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Contacts
Address: 13, B. Kislovskiy per., Moscow, 125009, Russia
Telephone: (+7 095) 234-4811 Fax: (+7 095) 705-9622 E-mail: [email protected] Web-server: www.micex.com