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. Last Updated: 07/27/2016

Exchange Charges Tele-Market with Pyramid Building

One of Russia's biggest stock exchanges has launched a blistering attack on the prominent investment company Tele-Market, accusing it of misleading investors on the returns they can expect from the firm's shares.


At a joint press conference Wednesday, where Tele-Market had hoped to improve its public image by capitalizing on a clean bill of health following an investigation into the firm by the Ministry of Finance and Tax Police, the company was instead subjected to a tough interrogation by its hosts, the Russian Commodities and Raw Materials Exchange.


"I don't like joint-stock companies that buy their own shares," said the exchange's president, Alexei Vlasov. "I think they're just building pyramids."


Tele-Market, which has bought and sold its own securities since July through three outlets in Moscow, promises investors returns of at least 100 rubles per day on each share with a nominal value of 1,000 rubles.


Asked by the exchange's Vlasov how the company could guarantee that the price of its stock would constantly rise, Tele-Market Invest's president, Sergei Semyonov, pointed to "the great opportunities" offered by the company's concept of creating a system of trading via computer modem throughout the former Soviet Union.


Semyonov said that the intellectual property of Tele-Market's system was worth some 500 billion rubles (almost $250 million) and that returns from investment in the project would be around 60 percent a year.


But according to a report on Tele-Market prepared by the Russian Commodities and Raw Materials Exchange and released to the press Wednesday, the size of annual dividends that Tele-Market can pay from the returns on its investments is unlikely to exceed a ruble value of 10 percent per year.


The report said that unless Tele-Market reduces the price of its shares, accepting a consequent reduction in revenues, the company is heading for a collapse similar to that experienced by the MMM pyramid.


Vlasov asked why the trading prices of Tele-Market's shares varied so much between the secondary market, where shares are traded independently of their emitter, and the primary market -- where Tele-Market's buys and sells its own securities at three outlets in Moscow.


While Tele-Market advertised that it was selling shares for 9,820 rubles apiece on Wednesday, they were selling for around a mere 4,500 rubles at the Russian Commodities and Raw Materials Exchange on Tuesday, where they accounted for 61 percent of the exchange's turnover in securities trading during the past week.


Semyonov said that this was merely a temporary phenomenon.


Vlasov charged that Tele-Market had artificially fixed the price of its shares above market level to gain greater revenues from the public.


Reporters also accused the company of making it difficult for shareholders to sell their securities back to Tele-Market, which the company advertised it was buying at 9,280 rubles apiece Wednesday.


Many investors complained of being told to wait weeks for their turn to sell their shares because of mysterious "computer problems," reporters said.


"I don't know anything about this," Semyonov said. "We buy and sell with the same technology."


Tele-Market Invest's president was also unable to say how many of its own shares the company has purchased this month.


Many of Russia's investment companies sell securities that are backed by little more than the firms' ability to convince their clients that the value of their investments will increase dramatically.