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. Last Updated: 07/27/2016

MGTS Votes to Split Shares by 50 Times




The capital's leading telecoms company, Moscow Telephone Company, or MGTS, is taking a step toward improving the liquidity of its stock, voting to split its ordinary shares by 50 times, the company said Wednesday.


MGTS intends to increase the par value of its paper by 1,000 times - from 1 ruble to 1,000 rubles a share - and then split it by 50 times, said Boris Lastovich, head of the securities department at MGTS. The stock would be left with a value of about 20 rubles apiece.


"We had to conduct the increase in par value and the split in two steps due to requirements of the Federal Securities Commission," Lastovich said.


MGTS, which approved the split this week, hopes to get the plan approved by the Federal Securities Commission by next summer.


Analysts called the move positive for share liquidity, but added that it is ill-timed since many shareholders still harbor ill feelings about an MGTS share dilution last year.


"The split will improve liquidity on the secondary market," Marina Oganesyan, telecommunications analyst with Aton brokerage, said.


However, the market holds fresh memories of the dilution orchestrated by company management in early 1998. AFK Systema holding, which is close to the Moscow government, acquired a stake in the company, paying $0.17 per share instead of the market price of $900 per share. Systema now owns 56 percent of MGTS through one of its subsidiaries. Svyazinvest holds 46 percent and foreign investors' shares have been reduced to 15 percent.


"There was unhappiness about the way it was carried out," said Tom Adshead, telecommunications analyst with Troika Dialog. "It increased corporate finance risk in the company."


Adshead added, however, that the planned split will not have an immediate impact on the market because retail investors, who are usually targeted in split decisions, have not been trading shares actively.


MGTS's liquidity has taken a hit as trade on the secondary market dried up after the August 1998 crisis. The telecom giant this summer looked to Western markets for funds when it launched a first-level ADR program. It hopes to win approval of a second-level ADR issue from the U.S. Securities and Exchange Commission as soon as the market picks up, Lastovich said.


MGTS' shares closed at $61 on Wednesday, almost 50 times lower than its all-time high of $2,800 in August 1997.