VTB recovered its losses the next day, but the bitter aftertaste remains. Investors no longer seem sure that VTB's assets will grow even in the event of an economic downturn, as they were promised.
On July 30, VTB closed on the MICEX at 13.52 kopecks, or 0.59% below the placement price of 13.6 kopecks per share. On the RTS, they closed at $0.0053, or 13.56 kopecks. Its global depository receipt (GDR) cost $10.5 on the London Stock Exchange, 0.57% below the placement price per GDR, which comprises 2,000 ordinary shares.
Had this happened to any other issuer, nobody would have batted an eye. But the public flotation of VTB shares was intended to be a landmark event on the Russian market. The Kremlin expected the IPO to demonstrate the flourishing state of the national banking system and the economy as a whole, and also to allay the fears of anyone still wary of the Russian stock market.
The authorities spent lavishly on VTB's road show, attracting 131,000 private investors who signed up for $1.5 billion worth of the bank's shares.
A previous highly anticipated IPO - of state-controlled oil company Rosneft - attracted only 115,000 investors and raised 20.2 billion rubles ($790.92 million), whereas Sberbank, the country's largest state-controlled savings bank, sold 21 billion rubles ($822.24 million) worth of its shares to 45,000 investors.
However, the high private interest in VTB shares made them defenseless against market fluctuations. Unlike professional investors, individuals expect the money they put into a security to bring immediate returns. Therefore, any turn for the worse provokes panic.
This phenomenon is common to all markets, but it is particularly pronounced in Russia, where people are only beginning to play the market, investing their hard-earned savings in such high-yield - and high-risk - assets as the shares of Russian companies.
Moreover, the public was informed in detail about the advantages of investing in VTB, but told very little about the market risks involved. As a result, if the bank's shares once again fall below the placement price, the disappointment may provoke a crisis of confidence regarding the bank's assets in particular, and IPOs of state-owned companies in general.
This is bad news for the bank's managers as well as Russian economic officials, especially since only a few weeks ago, they promised the bank would have a bright future.
Economic Development and Trade Minister German Gref told President Vladimir Putin: "The people will profit from their [VTB] shares."
Andrei Kostin, the bank's chairman of the board, said at the international economic forum in St. Petersburg last June: "The Russian government will prevent VTB's quotation from falling."
Therefore, we can expect the government to make financial interventions to help VTB if its shares continue to fall after the upward correction on July 31.
Anatoly Gorev is an independent financial analyst.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
