The postponement of Nord Gold's $1.5 million floatation on the London Stock Exchage on Thursday marks investor's concerns about Russian initial public offerings.
Norgold, a precious metals unit of Russia's largest steel maker Severstal, is the third Russian company to reject floatation plans due to poor market conditions in recent weeks. Pig iron and coking company Koks postponed its offering last week, and pipe producer ChelPipe cancelled on Thursday.
Analysts say Russian issuers have gained a reputation for overvaluing their shares in London and for the stocks to then underperform the stock market.
"These companies are paying for the past mistakes of other companies," says Roland Nash, chief investment strategist at Verno Capital. "If you make a mistake once, it is seen as bad luck, if you make a mistake time and time again, people get suspicious."
Russian pumps manufacturer HMS Hydraulic raised significantly less funds than was initially expected for its floatation on Tuesday.
Nord Gold said investor demand did not meet the company's desired placement price of 300 to 390 British pence per share and it was not prepared to lower the price. Koks and ChelPipe cited similar reasons for cancelling their offerings.
Observers say many investors are holding out for the forthcoming $3.6 billion share sale in Russia's VTB bank. The bank is the first government-controlled company to sell its shares publicly as part of a state $34 billion privatization program.
But the drop in investor demand may force VTB to lower its share price to attract buyers. The price has already dropped 13% since the sale was announced in early February.
"VTB is priced very attractively," Nash said. "In a more normalized environment it would probably get away OK, but on the tail of the failed IPOs, there will be some risk."
A number of other Russian companies are also planning big IPOs in London later this year. The list includes handset retailer Yevroset, Nomos Bank and Moscow's Domodedovo Airport. Analysts say it is not yet clear how the recent drop-outs will affect the future floatations.
"Russia needs a couple of good IPOs from companies with well-priced levels so that the market opens up," Nash says.
MOSCOW, February 11 (RIA Novosti, Natasha Doff)
