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. Last Updated: 07/27/2016

Gazprom Shares Open Up, Just a Crack

Trading activity in Gazprom's highly illiquid shares has increased recently, but the gas monopoly's market remains stubbornly closed to normal trading, brokers said Tuesday.


Gazprom, with a wealth of energy reserves and high profits, has held two closed auctions for its shares in recent weeks, whetting investors' appetites, but dealers said the tiny fraction on offer made the move nearly insignificant.


"They're selling so little at one time, so it's very difficult" to affect the market, said Alexander Pitaleff, a trader at Creditanstalt Grant. "At this pace, they can continue these auctions for maybe 25 years, and then sell only 5 percent of Gazprom."


The first auction amounted to 0.01 percent of the company's shares, while at the second auction 0.016 percent of the total was sold. Still, traders said the auctions contributed to greater interest in Gazprom shares and indicated that the opaque company might gradually crack open its market.


"I think that interest in trading Gazprom shares has sharply increased recently," said Vera Sevruk, international sales manager at Alfa-Kapital, which took part in the auctions. "In general, the opinion of market players is that Gazprom is more open than it was before."


Other houses taking part in the March 6 auction were Troika Dialog, Brunswick and Vostochny Investment Company, a subsidiary of Renaissance Capital.


The Federal Securities Corporation will hold three more auctions in April and three in May, brokers said.


Gazprom officials could not be reached for comment Tuesday about their securities program.


Domestic and foreign investors hungrily eye the natural gas giant, which is considered absurdly undervalued. But it is difficult to pin down an average share price for Gazprom, since tight restrictions on share sales severely limit trading on the secondary market. In addition, owners of Gazprom shares have different minimum prices at which they are allowed to sell their shares.


Rem Vyakhirev, chairman of Gazprom, could be trying to boost the company's share price by selling high to foreign investors. Gazprom has earmarked 9 percent of total stock for sale for foreigners.


Vyakhirev said recently that offers coming in to financial adviser Kleinwort Benson from institutional investors were too low. He said, "We're not letting them sell the shares," The Financial Times reported Monday.


Vyakhirev said of negotiations with potential investors, "We'll keep talking. But we're not rushing to sell the shares. They won't vanish anywhere."


Market players said the auctions and trips by Vyakhirev to London and New York were likely meant to test the waters, to see what share price the company could lure when it finally does open its market fully.


"I think that, above all, these auctions are more from Gazprom's [initiative] than investors," said one trader who asked not to be identified. "Gazprom is trying to work on keeping an eye on its shares in the market."


At the March 6 auction, the average price per share was 406.6 rubles (9 cents), compared to a starting price of 300 rubles each. At the March 21 auction, Gazprom shares sold at an average price of 448.73 rubles, with a starting price of 386 rubles per share.