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. Last Updated: 07/27/2016

CB Under Fire Over Sberbank Emission

A controversial share emission by Sberbank has diluted minority shareholders' stakes by 36 percent and allowed the Central Bank to increase its ownership by 1.2 percent to 63 percent of voting stock.

In the past, the Central Bank has promised to keep the size of its stake in Sberbank unchanged, and analysts doubt it could have done this without access to insider information — the size and price of the bids of other buyers in the placement.

Sberbank placed a total of some 5 million shares at $36 per share April 25, citing the need to recapitalize the bank as an excuse for a 36 percent dilution of the existing shareholders who did not participate in the subscription.

At that price, any increase of the state's stake in Sberbank could be treated as acquisition of assets below the market value with the use of insider information, said Troika Dialog's Andrei Ivanov.

A group of foreign shareholders, led by Hermitage Capital Management managing director Bill Browder, has been pressuring Sberbank and now intends to force its registrar to disclose the full shareholder list.

"We are going to carry on with our legal action to invalidate the share issuance," Browder said.

A shareholder who owns at least 1 percent of a company has a right to ownership details upon request under Article 8 of the law on the securities market.

"We will use our right immediately," said Browder.

On May 24 and May 30, courts will hear cases filed by Dalnyaya Step, a company connected to Hermitage, against Sberbank's advisory board and the Central Bank, which authorized and registered the new share issuance.

The shareholder list could be made available at Sberbank's annual shareholder meeting, but so far the meeting has not been called.

Sberbank's press service did not disclose the date of the annual meeting Friday, saying such information was unavailable.

"The news Sberbank released is more like no news at all," said Abramov. "Significant pieces of information were withheld."

Recently, the market has been ripe with speculation that a large portion of the newly issued shares would end up in the hands of one of the oligarchs, who could gain a major influence on the largest savings bank in the country.

"Free float in Sberbank will become smaller," Ivanov said. "What we heard today is a bit of a negative piece of news."

Sberbank's share price had risen 43 percent since the start of the year to $36 per share Friday, but analysts said the way the emission was handled reinforces corporate governance risks and undermines credibility in the management practices of the bank.

"There is no guarantee this will not happen again in the future," said Andrei Abramov, analyst with NIKoil brokerage. "Sberbank is very untransparent."