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. Last Updated: 07/27/2016

Sberbank Sale Could Miss $7.6Bln Target

The final stretch of Sberbank's share sale looks likely to be a bumpy ride, as the market gives investors who bid on its shares every reason to pull out of the deal. What has already proven a lackluster share sale could fail to meet Sberbank's minimum fundraising goal, analysts said Tuesday.

Investors now have two weeks to pay for the shares they bid on during last month's 20-day emission. But most banks are advising them to wait until the very last day, March 21, to see whether the shares remain worth buying.

Sberbank announced Feb. 21 that the price of each emitted share would be 89,000 rubles ($3,394). But on Monday the price of Sberbank shares on local exchanges dipped 3,000 rubles below that point as Russian stocks felt the force of a weeklong global emerging-market correction. By the close of trading, it had mysteriously recovered, outpacing both the RTS and its fellow blue-chip stocks.

"The closing price is very strange. It would be understandable for them to be supporting the price," said Bob Kommers, a banking analyst at UBS.

Alexander Kantarovich, head of research at MDM Bank, was even more convinced that the price had been propped up. "The support was clear at the end of the day," Kantarovich said. He added that it would have cost about $45 million to buy up enough shares to orchestrate Monday's sudden jump.

Kantarovich said the same thing seemed to have occurred last Wednesday, when Sberbank also outperformed the RTS Index for no apparent reason.

The Federal Securities Commission is already investigating Sberbank's share sale for earlier signs of price manipulation, but the agency could not be reached Tuesday to comment on this week's events. A spokesman for Sberbank declined to comment.

Analysts said the market correction was likely to continue this week, meaning that Sberbank's stock may dip below 89,000 rubles again, and even stay there. In such a case, it would make sense for bidders to revoke their bids and instead purchase shares cheaper on the market.

The shares they had bid on would then revert to Sberbank, and its much-hyped public offering, which is already 25 percent undersubscribed, would end up with an even greater shortage of buyers. From day one, the flotation has been plagued by scandals, volatility and allegations of mismanagement. Analysts blamed Sberbank for the current situation as well.

"The potential problems arising now could and should have been avoided by a smoother deal process," UBS said in a note to investors Tuesday.

Sberbank had initially planned to sell 3.5 million shares for around $12 billion. When all the bids were in and the share price was set, Sberbank said the sale would pull in $8.8 billion. Sberbank's goal was to raise at least $7.6 billion. But now the sale is at risk of falling short, an outcome the government, some of whose top officials sit on the Sberbank board of directors, will be eager to avoid.

And after the emission, demand is not likely to get any better.

"People are up to their eyeballs in Sberbank," Kantarovich said. "Everyone who could have bought has bought already."