Russia’s IPO boom turns to bust

An expected initial public offering (IPO) bonanza for Russian companies is in jeopardy after two major listings were abruptly cancelled. The owner of Russia’s largest alcohol retailer, Red & White, announced Tuesday that it was canceling its placement just a few days after the Delimobil carsharing service postponed a listing on the New York Stock Exchange.

• Mercury Retail Holding, which owns leading alcohol retailers Red & White and Bristol, said that its IPO will not happen due to “market conditions”. As we wrote last week, the company was anticipating a valuation of up to $13 billion that would have made it the biggest food and drink retailer in Russia.
• When it postponed its IPO the week before, Delimobil also cited “market conditions”. The company came up against limited demand, according to sources cited by Forbes, as investors were unconvinced by the business model of a service that is competing with giants like Yandex — and that is heavily dependent on favorable government regulation. Delimobil, which was aiming at a valuation of almost $1 billion, blamed the pandemic, competition in the car-sharing market, and the danger of possible cyberattacks and computer viruses.

• Despite the disappointments of Mercury and Delimobil, another major IPO, that of the St. Petersburg Stock Exchange, is still due to go ahead. The company announced Tuesday it wants to raise about $150 million and get a valuation of up to $1.3 billion.
• Originally, the St. Petersburg Stock Exchange planned to float in the U.S. with a valuation of $2.5 billion. However, it encountered obstacles: according to Forbes, the auditors did not issue a document required to validate the prospectus. The company now plans to seek a NASDAQ placement in the first half of 2022.
• One major Russian IPO did take place recently — although it could hardly be described as a major success. The Cian real estate platform, which dominates the Russian market and ranks among the top 10 real estate services in the world, floated earlier this month in New York and Moscow. Cian managed to list at the upper end of its initial price range, and was valued at $1.1 billion. However, since the IPO, shares in the company have fallen 14 percent.

Why the world should care: The failed IPOs of Red & White and Delimobil suggest that Russian companies need to offer a big discount on their shares compared to their international counterparts.