Russian mobile operator MegaFon limps over line at London listing | Nils Pratley

UK investors still have good reasons to be nervous about being minority shareholders in an oligarch-dominated venture

It was the largest capital raising in London by a telecoms company since 2001 and the first big Russian arrival since 2007. But MegaFon hardly sprinted over the line.

The shares, which the company hoped might fetch $25 each, were priced at a bottom-of-the-range $20 and slipped below even that level when trading started.

That's the difference between a valuation of $14bn and one of $11.1bn – a lot, even when only 15% of the company was actually being sold.

What was the problem? Simple: the company and its banking advisers were too greedy on price.

MegaFon is not alone in the world of quoted Russian telecoms stocks – MTS and VimpelCom already have listings in New York.

There are decent arguments that MegaFon's medium-term commercial prospects are the brightest of the lot since it is a pure-play Russian operator and appears well-invested for the 4G era.

On the other hand, MTS is the market leader. MegaFon, the number two, was pushing its luck in thinking it should be valued at only a slight discount to MTS on an enterprise value-to-cash earnings basis.

That is doubly so when you remember that the controlling shareholder is controversial Uzbek oligarch Alisher Usmanov. The complicated structure through which Usmanov's company owns 55.8% of MegaFon was tidied up ahead of flotation and the various shareholder and voting agreements were reasonably well explained. Lord Myners, corporate governance stalwart, was hauled on board, albeit late in the day, as a second independent non-executive director.

But London investors still have good reasons to be nervous about being minority shareholders in an oligarch-dominated venture out of eastern Europe. There have been too many disasters in the past.

Let Usmanov and MegaFon prove they are different, seems to have been the general mood.

Quite right too: if the shares aren't offered at an obviously bargain price, there are plenty of other emerging market stocks to buy.

Contributor

Nils Pratley

The GuardianTramp

Related Content

Article image
Russian mobile network MegaFon confirms London IPO
Mobile operator owned by Russia's richest man expected to float 15-20% of shares on London and Moscow exchanges

Juliette Garside, telecoms correspondent

09, Oct, 2012 @11:46 AM

Article image
Russian mobile operator MegaFon seeks £2.5bn London flotation
IPO of company controlled by Russia's richest man would be world's biggest since Facebook listed in New York

Charles Arthur and agencies

04, Sep, 2012 @6:48 PM

Article image
Oxford Nanopore float offers London a proper tech future
Planned IPO of life science group will test LSE’s appetite for funding high-growth tech

Nils Pratley

30, Mar, 2021 @6:30 PM

Article image
Vodafone to sell off 60,000 mobile masts for €20bn
Shares climb 8% as investors eye potential IPO of new standalone firm TowerCo

Mark Sweney

26, Jul, 2019 @10:22 AM

Article image
Snapchat's potential $25bn flotation may sink company's appeal
Amid rumours that it is eyeing an IPO, the app’s fast and furious business model may well put off advertisers

Nils Pratley

16, Nov, 2016 @7:45 PM

Article image
Loss-making Uber does not look like a business worth $90bn
As drivers protest and the IPO roadshow rolls on, investors need to ask some tough questions

Nils Pratley

08, May, 2019 @5:19 PM

Article image
UK ‘waking up’ to poor tech-listing appeal in London, says Arm innovator
New York is obvious choice for British-based chip designer’s IPO, says Hermann Hauser

Kalyeena Makortoff

05, May, 2022 @4:18 PM

Article image
Man behind MegaFon pictured with alleged Russian gangsters

• Telecoms company's London flotation slips
• Post-Communist Moscow connections emerge

Simon Goodley, Luke Harding and Miriam Elder in Moscow

28, Nov, 2012 @10:12 PM

Forget common sense: bring on the Twitter IPO madness
The Twitter valuation, even if it were cut in half, would be ridiculous if you care about profits and earnings – it has never made any

Nils Pratley

06, Nov, 2013 @7:52 PM

Article image
Crypto’s gold standard claims are fading fast | Nils Pratley
Bitcoin and its ilk have slipped deeper alongside the market appetite for risk. Just look at the Nasdaq

Nils Pratley

25, Jan, 2022 @6:44 PM