(Bloomberg) Sanctioned or not, Russian billionaires face new obstacles after President Vladimir Putin dropped the curtain on the era of foreign stock quotes.
Putin signed legal amendments on April 16 requiring Russian companies to stop listing their shares abroad, intensifying a process that has gained momentum since the annexation of Crimea in 2014.
That could force tycoons — including Russia's richest man, Vladimir Potanin, as well as steel billionaires Vladimir Lisin and Aleksey Mordashov — to reconfigure the ownership structure of the companies they own, in part, through foreign currency dividend shares.
“Most companies and their main shareholders that were listed or held certificates of deposit abroad gained a lot thanks to financial freedoms and economic ties with the West,” said Anton Zatolokin, head of research at Otkritie Broker. “By destroying what took 30 years to build, they take a direct and indirect hit.”
Few things in the late 1990s and 2000s showed Russia's growing economic influence and global financial integration better than registration programs for certificates of deposit in New York, London and Frankfurt by the country's largest companies, such as MMC Norilsk Nickel PJSC and Lukoil PJSC.
From a high of $17 billion in 2007 alone, initial public offerings of Russian securities abroad have faltered in recent years, data compiled by Bloomberg shows. Such contributions have raised only $6 billion in total since Russia's annexation of Crimea in 2014, when international sanctions showed how vulnerable companies were in foreign markets as the geopolitical situation worsened.
Since the invasion of Ukraine on February 24, foreign exchanges have frozen trade in certificates of deposit of Russian companies. The international sanctions that followed have targeted the country's tycoons, banks and even foreign reserves, while reducing the share value of publicly traded Russian companies to pennies in a matter of days.
According to the amendments signed by Putin, the negotiation of certificates of deposit in foreign exchange must be stopped 10 days after the publication of the bill. At the same time, laws allow special exceptions if companies request permission to continue trading.
Under the amended law, foreign holders of canceled certificates of deposit would receive ordinary shares that are placed in accounts of non-residents in Russia. Since the invasion, capital controls have prohibited foreigners from selling Russian securities, making it impossible for now to sell ordinary shares and repatriate profits.
Even before the bill comes into force, JPMorgan & Chase have begun allowing holders of certificates of deposit in Russian companies to cancel them, Reuters reported, citing two unidentified individuals familiar with the matter. Citigroup Inc. has opened books to cancel GDR for En+ Group, which counts billionaire Oleg Deripaska as its largest shareholder, according to a company document.
“The rights of shareholders who believe in Russia and have invested in the Russian market for many years and who cannot directly own Russian shares are being damaged,” steel magnate Lisin said in an interview with Kommersant this month, commenting on the law. “They have nothing to do with politics and there is a risk of simply losing your property rights.”
Original Note:
Putin Calls Time on Foreign Listings in Fresh Hit to Tycoons (1)
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