Vodka to Pawnshops Set to Drive Next Wave of Moscow IPOs

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·3 min read

(Bloomberg) -- Retail investors have pushed Moscow’s benchmark index to levels last seen before Russia’s invasion of Ukraine. Now their money is luring dozens of smaller companies to sell shares to the public.

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Half a dozen firms in industries ranging from information technology to clothing have so far sold over 12.4 billion rubles ($130 million) in stock in initial and secondary public offerings this year, up from only one successful IPO last year, according to data compiled by Bloomberg. Retail investors, with about eight times the amount of cash in their accounts that funds now have, have dominated sales.

Next up to list are one of the country’s biggest independent fuel retailers, offering an amount that’s twice as much as all the other sales combined, and a gold miner that was sanctioned by the UK this week. EuroTrans, with 26.5 billion rubles of shares for sale, plans to list on Nov. 21, according to a statement on its website. On Thursday, gold miner Yuzhuralzoloto said it will offer a 5% stake to investors this month. The company may seek a valuation of 120 billion rubles, RBC newswire reported last week.

Vodka maker Kaluga Distillery Kristall and Mosgorlombard, a pawnshop chain based in the capital, also said they’re planning to list shares soon. Five companies are preparing IPOs before the year ends, depending on market conditions, Interfax reported, citing the Moscow Exchange’s Natalia Loginova.

Different Market

“Expectations of a large number of IPOs are finally coming true, but the market has completely changed,” Maxim Orlovsky, co-chief executive officer for Russia at Renaissance Capital investment bank, said by phone. Without institutional investors as buyers, the deals will remain small, he said.

After surging to a decade high of more than $3 billion sold in Moscow and London in 2021, the IPO pipeline shut when President Vladimir Putin sent troops into Ukraine in Feb. 2022. Funds fled the market as the US and EU piled on sanctions. The only sale last year, by e-scooter firm Whoosh, raised $33 million.

But for citizens who’ve remained at home, the desire for a return on their savings is aligning with the needs of local companies suddenly facing severe limitations on their access to capital. While banks offer interest rates of around 10% on deposits, the MoEx Russia stock index has jumped 50% this year, one of the best performances among stock indexes tracked by Bloomberg globally.

Russian money isn’t very welcome abroad, making domestic options for investment more appealing, said Oleg Vyugin, a former senior official at the central bank and Finance Ministry. “Not all the money left Russia, but the gate has closed.”

More than 80% of the trading volume in shares now comes from private investors, according to the Moscow Exchange. Retail accounts soared to 8 trillion rubles at the end of the second quarter, 48% higher than a year earlier, according to the Bank of Russia. At the same time, funds that used to dominate IPOs manage only about 1 trillion rubles.

More Deals

More and possibly bigger deals may be encouraged by a government directive to Russian investors who scooped up assets from departing foreign businesses — that some of those shares must be listed. Such share offers should be held one to three years after deals are closed, Bank of Russia Governor Elvira Nabiullina said in October.

The multitude of small players may increase the risks in Moscow’s market, while “the absolute dominance of retail investors makes trading itself more volatile,” said Elena Kozhukhova, an analyst at Veles Capital.

For now, though, retail investors are taking advantage of the opportunities, with companies such as Astra Group PJSC nearly doubling in the opening days of trading.

“I secured my best IPO trade result ever,” Vladimir G., 36, said of Astra, asking not to provide his full name to protect his financial security. He called the company “a Russian Microsoft, a clear winner from the current geopolitical division.”

(Updates with Moscow exchange info in fourth paragraph.)

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