Feb 22, 2022
Russia’s U.K. Stock Sales Dry Up as Johnson Rolls Out Sanctions
, Bloomberg News
(Bloomberg) -- Russian stock offerings in London that had just started gathering pace again have ground to a halt as the U.K. explores sanctions in response to Russia’s military buildup around Ukraine.
Share sales by Russian companies raised $2.4 billion in Britain last year, the most since 2017, according to data compiled by Bloomberg. Now, appetite for London-listed Russian stocks is quickly evaporating.
On Tuesday, Prime Minister Boris Johnson said the U.K. will sanction five Russian banks and three high net-worth individuals. Last week he said the nation was preparing to block access to U.K. capital markets in case of an invasion of Ukraine.
While a rally to a record high for Russia’s equity benchmark supported last year’s deals, it has reversed course to become the world’s worst-performing country index in 2022. Western governments began introducing sanctions Tuesday after Moscow recognized two self-proclaimed separatist republics in eastern Ukraine, escalating tensions and casting a shadow over financial markets.
“With the geopolitics flaring up, the equity capital markets pipeline Russia had in store looks to have been put on ice,” said Luis Saenz, head of international distribution at Sinara in London.
Some investors have been shifting their holdings lately out of Russian depositary receipts traded in London and into the Moscow-listed shares of the same companies, he said.
U.K.-listed shares of Russian companies like VTB Bank PJSC, Gazprom PJSC and Sberbank PJSC have fallen 13% or more over the past two days. Discount retailer Fix Price Ltd., which went public in London about a year ago, now is 47% below its listing price.
Russia has repeatedly said it doesn’t plan to invade. On Tuesday, Moscow recognized two self-proclaimed republics in eastern Ukraine and President Vladimir Putin ordered his troops into the separatist-held enclaves.
The European Union, meanwhile, said Tuesday it’s proposing sanctions that would target Russia’s ability to tap the bloc’s capital markets. That won’t have the impact on equity fundraising that U.K. sanctions would, since Russian companies raised no money via stock sales in the EU over the past five years, according to data compiled by Bloomberg.
But the Russian government and companies have raised more than 16 billion euros ($18.2 billion) by tapping the euro area’s public debt market since the beginning of 2017, according to data compiled by Bloomberg.
The geopolitical turmoil will also deal a blow to Russian stock sales at home. The likes of car dealership Rolf, beet-sugar producer Prodimex Group and fertilizer maker EuroChem Group were said to be planning initial public offerings this year.
“It seems that the Russian IPO market will be on hold now for a long time, because in most cases it still strongly depends and counts on foreign investments,” said Konstantin Asaturov, a portfolio manager at Moscow-based Sistema Capital.
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