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. Last Updated: 07/27/2016

Lack of Transparency Prompts MT Index to Drop Gazprom

The Moscow Times will remove Gazprom from the MT Index beginning Monday July 3 on the recommendation of the index's advisory board, due to the company's continued unwillingness to allow the company's shares to be freely traded on the market.


Gazprom managers made it clear at a recent shareholders' meeting that they have no intention of offering their shares on the market for transparent sales and registration for at least another year, causing the advisory board to rethink the company's place in the index.


Although Gazprom share prices are quoted and some have been bought and sold, registration of any sale is contingent on approval from Gazprom's management and it has become increasingly clear that such approval is difficult to obtain.


As a result, Gazprom did not meet the MT Index criteria for transparency or percentage of shares outstanding. The advisory board had made an exception for Gazprom when choosing companies for the index, in recognition of the giant gas monopoly's importance to the economy and in the belief that its sales and registration policy would soon change.


"We thought that it was going to become more transparent after the shareholders meeting but that did not happen," said board member William Kornitzer, director of corporate finance, Ernst and Young Vneshaudit.


Gazprom's place in the index will be taken by Magnitogorsky steel company, a major Urals metal producer.


"This company is open about its dealings and more than 25 percent of its stock is freely traded," said Sergei Skatershchikov, director of the Skate-Press agency, which is responsible for calculating the index.


Skatershchikov said the MT Index is likely to react more quickly to market changes following the removal of Gazprom, which accounted for more than a quarter of the index's total market capitalization and rarely moved.


The index would also be less susceptible to any possible arbitrary shifts in Gazprom's quoted share price, he said.