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. Last Updated: 07/27/2016

Steelmaker Cancels Placement of Shares

Magnitogorsk Iron and Steel, or MMK, delayed indefinitely its first-ever offer of shares to investors just hours before a Wednesday placement, blaming a slump in emerging markets. The metals firm's decision comes in the wake of a string of Russian bond and share issue cancellations and postponements last month.

The country's No. 3 steel producer announced the delay Wednesday morning. A placement of 2 percent of MMK shares on the MICEX exchange was scheduled for 1 p.m. Moscow time.

"Placement preparations showed that among investors there still persists a feeling of uncertainty regarding the short-term dynamics of the market," MMK said in a statement. The company will reconsider the placement after the capital markets stabilize, Yelena Azovtseva, an MMK spokeswoman, said by telephone. She said the company made the decision to withdraw from Wednesday's sale the previous day.

Despite last week's resurgence in emerging markets following a dramatic slump in late May, investors remain cautious about Russia's capital markets. The country's largest grocery store chain, Pyatyorochka, recently decided to indefinitely postpone a domestic listing , while only half the announced bond issues for May went ahead.

MMK's last-minute turnaround came as a complete surprise to the MICEX exchange and to the banks involved in the placement, Renaissance Capital and Gazprombank.

"I'm just as surprised as you," a source at one of the banks said, asking not to be named due to the bank's involvement in the deal. While the cancellation was "nothing sinister," it could damage the company's reputation with potential investors, the source said.

Less than 1 percent of MMK is traded on the off-listed section of the RTS and MICEX exchanges. The company's vice president, Vladimir Shmakov, said last month that the 2 percent placement was intended to introduce the company to investors, potentially leading to an initial public offering sometime in 2007.

Timothy McCutcheon, a fund manager with DBM Capital, said the sudden delay might be due to poor communication between the company and its brokerages. The price range for the Wednesday placement, between 67 cents and 72 cents per share, which would value the company at $7.1 billion to $7.65 billion, did "seem a little low," McCutcheon added.

"A lot of funds see Russia as one kind of exposure," McCutcheon said. With the Rosneft IPO in two weeks, funds with a limit on their investments in Russia may not have any spare cash for MMK, he said.

The placement's late cancellation is unlikely to irritate investors, since the current market volatility is not good for the company or potential shareholders, said Nikolai Lukashevich, an analyst with Fitch Ratings.