In a study of 22 Russian companies that have held IPOs since the end of 2004, Vedomosti showed that the value of most issues had increased slower than the growth of Russia's premier stock market, the Russian Trading System (RTS).
Russian companies are expected to attract some $20 billion in IPOs this year, Vedomosti quoted the head of Russia's markets regulator as saying. The Federal Financial Markets Service (FSFM) said the forecast was based mostly on orders received from investment banks rather than on market trends.
Since early 2005, the paper said, it has become more difficult for newcomers to compete with "traditional" companies - those that debuted earlier - and only shares in natural gas producer Novatek, Rambler Media Group and steel producer Novolipetsk Metals Combine (NLMK) have grown faster than the RTS main index.
Until then, IPO share prices had largely outperformed the market index, as investors had few options if they wanted to diversify their portfolios in Russia's economy, skewed then as now toward the oil and gas sector, Vedomosti said. Indeed, investors have little choice when blue chips are predominantly oil and gas companies, thereby pushing up demand for shares of the consumer and telecommunications companies that account for a large share of the IPO market.
Some investors have already got the message, the paper said. "In most cases there is no point in buying these shares," Alexander Branis of Prosperity Capital Management said, adding that prices were too high.
FSFM head Oleg Vyugin said that government pressure on business in 2004 had led to older companies appearing undervalued the following year, which meant they could outperform the newcomers. Besides, he said, the lifting of the Gazprom "ring fence" - restrictions on foreign ownership of shares - also sent blue chips up.
Experts say debuting companies benefit not only from a lack of non-industrial securities, but also from the underdevelopment of many sectors, which has led to rapid growth.
"Retail networks are growing equally with inflation in the West, but by 50% in Russia," said Kamran Ulukhanov, executive director of major regional bank Uralsib.
Dmitry Kryukov from Kazimir Partners managing company told Vedomosti that owners of companies that hold IPOs often fix share prices too high in an attempt to secure more investment.
But the paper said Russian IPOs were still wildly popular. MDM Bank and Dresdner Kleinwort Wasserstein, lead managers for an IPO being held by Razgulyai agricultural group, said demand for the issue was six times larger than the actual size of the offering.
Anton Chernoi of Renaissance Capital investment bank said the massive growth of oil companies also posed a serious problem for new offerings.
"If oil prices stop rising so fast, investors will not hesitate [to diversify] and shares of, for example, consumer companies will be in demand," he said.
Companies slated to hold IPOs this year include state-owned oil giant Rosneft and state telecommunications holding Svyazinvest. The value of the Rosneft offering alone has been valued at anywhere between $8 billion and $20 billion, although most experts now say the lower figure is more likely. Rosneft has said it will launch a road show ahead of the IPO June 26.
