Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Gazprom ADRs Price Up in London Debut

LONDON -- The price of American Depositary Receipts in Russian gas giant Gazprom was being quoted at nearly $2 above the issue price shortly after official trading began in London on Monday.


A package of shares had been issued last week to test the offer price of $15.75 per ADR of 10 underlying shares, and the price peaked at $19.50.


Early Monday, when official trading began in a full issue of 23.7 million bundles of 10 shares, the price was being quoted at $17.50. The opening of trading marked the first international flotation by Gazprom, the world's biggest producer of natural gas.


ADRs, which meet standards set by the U.S. Securities and Exchange Commission, allow foreign investors to buy dollar-denominated shares without having to confront the complex Russian share transfer and custody system.


The first Russian company to be listed on the London Stock Exchange, Gazprom raised $373.3 million from the sale of 1 percent of its share capital, valuing the vast monopoly at about $37 billion. The issue was heavily oversubscribed, resulting in a relatively high price for the shares.


"There was a huge interest," said Tom Attenborough at German-owned investment bank Dresdner Kleinwort Benson, which was the lead issuer of the shares together with Morgan Stanley of the United States.


Trading in Gazprom shares was now "steady," he added.


The flotation raised more than any other depositary receipt listed on the London Stock Exchange. The share price fixed Gazprom stock values at three times the price of its domestic shares.


In all, about 9 percent of Gazprom is to be floated on international markets following this initial foray. The company, which sits on one-quarter of the world's natural gas reserves, represents an enigma for investors who are enticed by its vast resources and close ties with the Russian government, but concerned by political and legal instability in Russia.


At Swiss-owned investment bank SBC Warburg, the head of trading for Eastern Europe and the Mediterranean, Paul Van Den Boogaard, said investors who had bought shares in Gazprom were in "for the long term."


He said "the potential is enormous," but warned that the company had to start "making access easier for the West," to harness the funds and technology required to exploit Russia's vast gas reserves.