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. Last Updated: 07/27/2016

MMK Share Float Tests Market Nerves

Itar-TassWorkers guiding molten steel at a Magnitogorsk plant. MMK aims to raise at least $1 billion in London and Moscow.
YEKATERINBURG -- Steelmaker Magnitogorsk, or MMK, said Monday that it would float shares in London and Moscow, which analysts say will be a key test of investor demand at a time of emerging market jitters.

The company, which has a market capitalization of just over $10 billion, is aiming to raise at least $1 billion from the initial public offering, banking sources said. That was revised down from an earlier target of over $1.5 billion, they said.

MMK, which has permission to place up to a quarter of its shares abroad, said it would offer shares on the London Stock Exchange, with ABN AMRO, Morgan Stanley and Renaissance Capital acting as lead managers.

Pre-marketing for the roadshow is set for early April, and books will close after the May holidays, banking sources said.

Russia's May Day and Victory Day holidays are on May 1 and May 9.

The offering comes hot on the heels of two recent Russian IPOs that priced at the bottom of their indicative ranges, while another planned by GV Gold was shelved at the last minute.

"They are brave, given the cooling steel prices and fragile sentiment in the emerging markets asset class," said Chris Weafer, chief strategist at Alfa Bank.

Investors have given Russian IPOs a reality check after metals firm Polymetal and electronics maker Sitronics priced near the bottom of their ranges in February. Their shares have since undershot their listing prices.

Weafer said that, unlike IPOs by state companies whose equity issuance tends to be supported by strategic investors, "Magnitogorsk won't be able to tap into oligarchs' money invested on behalf of the government.

"This will be a truer test of investors' appetite for Russia," Weafer said.