Media, Not Politics, Hitting IPOs

Some Russian firms are delaying their IPOs until after the presidential election in March, but it's not politics they are worried about.

Instead, they fear their plans will receive less coverage in the domestic and international media, according to a survey released by Deloitte on Monday.

"Good media coverage is important," said Maxim Lubomudrov, a partner at Deloitte and co-author of the report.

"Preparation for an IPO can take two to three years. The final three to four months are very critical in terms of how a company communicates all of its developments and governance news," he said. "So, if they don't have a chance to get to the right audience, that will be an additional obstacle for them."

The survey, carried out from September to November last year, polled senior executives from more than 100 companies in Russia, Ukraine and Kazakhstan.

Those questioned shrugged off the political risk posed by the election, noting that access to investors through channels such as the media was of greater importance, and could affect the timing of their IPO plans.

Russians will vote for a new leader on March 2. With President Vladimir Putin backing First Deputy Prime Minister Dmitry Medvedev as his successor last month, the election is seen as a done deal. Still, local and foreign reporters are keeping a close eye on the Kremlin for any indication of a change of plans.

Deloitte declined to provide the names of any of the companies it had surveyed, and some market players cast doubt on the importance of the role of the media in determining IPOs.

"Frankly I see it as a convenient catch-all reply," said Christopher Weafer, chief strategist at UralSib. "The period ahead contains considerable uncertainty, and companies tend not to say publicly that the timing depends on the price that investors will pay."

"You don't place IPOs through the newspapers, you do it by meeting with investment professionals," said Ivan Mazalov, a director at Prosperity Capital Management, a $5 billion fund company focused on Russia.

"The major issue for us is the price and the amount of demand that we get," he said.

Jon Edwards, senior manager for Central and Eastern Europe at the London Stock Exchange, said fewer IPOs might be held in the first quarter of 2008 but he still expected a fair number. "We do still see companies, which are pursuing quarter-one IPOs to take advantage of a good year, in terms of their own performance. ... They want to strike while the iron is hot," he said.

Gazprombank, Acron, UralSib and a number of other companies have all suggested they will seek a listing this year.

Several companies planning to go public toward the end of 2007 pulled their listings, citing hardening market conditions. Among these were Russian Timber, headed by Leo Hambro, and the New Generation Fund, Prosperity Capital's Russian electricity fund.

"The international markets are a disaster. It is not a good time to hold any IPO," said Philip Townsend, head of research at IFC Metropol.

Fears of a recession in the United States are among the top worries.

Many executives polled in Deloitte's report said they were fazed by the turmoil on international credit markets but that they would postpone rather than cancel their IPOs.

As companies wait for the picture to become clearer, they continue with their long-term IPO planning, including the preparation of accountants' reports, and the restructuring of legal entities.

In 2007, Russian companies raised $32.6 billion through IPOs, $18.7 billion of it in international listings.