One Year In, Russian IPO Surge Is Already Hitting on Hard Times

(Bloomberg) -- It didn’t take long for the surge in foreign interest that boosted Russian equity sales last year to sputter to a halt.

As a deepening geopolitical spat and a global stock selloff take their toll, the only initial public offerings making it to market this season are minuscule compared with last year’s deals. So far three companies have announced plans for share sales and none of them is bigger than $250 million.

One Year In, Russian IPO Surge Is Already Hitting on Hard Times

“The deals that have been announced are small, third-rate stories,” said Ekaterina Iliouchenko, a money manager at Union Investment Privatfonds GmbH in Frankfurt, who doesn’t plan to take part in any of the sales. “Geopolitics always get in the way of Russian markets.”

The deal list is making last year’s $3 billion bumper crop look like an exception rather than a rule in an IPO market that has been battered by sanctions and Russia’s dwindling relations with the West. While Russia’s main equity gauge has remained relatively resilient this year, a surge in global volatility and renewed geopolitical tensions over a poisoned former Russian spy ensured that no stock deals made it to market in the first quarter.

IBS IT Services PJSC is seeking to raise more than $100 million in a listing that could come as soon as this month. Recruiting firm HeadHunter on Monday filed for a $250 million IPO on the Nasdaq and meat manufacturer Cherkizovo Group PJSC said on Tuesday that it plans to raise about $150 million. Insurance company Reso has also said it plans an IPO in April.

The current IPO pipeline is the result of preparations that began last year, before the latest escalation in geopolitical tensions, according to Dmitry Brodsky, head of equity capital markets for Russia & the CIS at Renaissance Capital. Typically Russian companies try to come to market in April after full-year results have been announced and before public holidays in May.

The Moex Russia Index suffered its worst month in almost a year in March but is still up 7.6 percent for the year as a result of strong gains earlier in 2018.

“Nobody knows what lies ahead, with trade wars, sanctions and other scares, so to take some profits off the table at the current high market levels makes sense,” said Pavel Laberko, a London-based equity money manager at Union Bancaire Privee.

©2018 Bloomberg L.P.