Kommersant, April 19, 2002

The first initial public offering (IPO) took place in Russia
Yesterday the first initial public offering (IPO) was launched on the Russian stock market. RBC Information Systems floated its shares simultaneously on RTS and MICEX. The company was almost five times oversubscribed. However, some analysts and RBC's competitors think that the demand for the shares was spurred artificially.

OAO RBC Information Systems is the head company of the RBC holding. It owns 100 % of shares in the following five companies: the RosBusinessConsulting information agency, ZAO RBC Soft (programming), OOO RBC Center (system integration, domain registration and e-commerce), ID RosBusinessConsulting (printed products of the information agency) and ZAO RBC Holding, which owns six other companies engaged in advertising and technical support activities.

Yesterday OAO RBC Information Systems placed its shares on the RTS and MICEX exchanges. Out of 16 million shares, 5.5 million were floated on RBS and the rest of them on MICEX. Following the registration of the IPO prospectus with the Federal Securities Commission, the shares will start trading on the aftermarket. According to RBC General Director Yury Rovensky, the company has manages to attract a total of $13.28m in IPO proceeds. This means that RBC sold 16 % of its shares for just $2m less than the amount a major foreign investment fund offered for 100 % in RBC. As a result, the company's capitalization amounted to $83m in accordance with the "conservative" valuation of RBC's underwriter Aton Capital.

Contrary to gloomy forecasts of investment analysts, the RBC shares proved to be a top seller. Investors' demand for them exceeded supply by five times, making Aton Capital meet submitted orders at a proportion of 20.66 % of their initial order. According to Aton Capital President Yevgeny Yuriev, his company has not bought RBC shares for itself. The buyers were Russian banks, investment funds and insurance companies whose names are kept confidential. However, Ъ came to know that Probusinessbank, Petrocommerce and the Yamal investment fund as well as EBRD regional funds and the National Insurance Group were among those who bought shares. "We are sure that we have invested in good securities, which will grow 40 or 50 % to $1.20 in the first month of trading. However, the market will not be liquid at the beginning due to a very small free float. Purchased blocks of shares are most likely to be sold on the over-the-counter-market," said Andrey Vinogradov, head of the Petrocommerce department for securities market. In the opinion of Sergey Sklyarov, whose Yamal fund took up about 1 million RBC shares, "the growth of the company's stock in the near future will be comparable with the dynamics of Wimm-Bill-Dann ADRs."
However, many analysts doubt these sanguine forecasts (see the reference note). Although RBC senior officials say that these analysts are biased, they keep criticizing RBC's valuation given by the underwriters.

For example, members of the Association of Economic and Financial Information Providers, which comprises AK & M, Interfax, Prime-TASS and others, say that data about RBC's market share as business news provider is overestimated. RBC's subscription revenues reach $2m. Aton and Alfa-bank assessed it as 25-30% and 65% of the market respectively. The strange thing about this is that Interfax alone receives over $5m in revenues from subscription for business information a year and Prime-TASS earns $1.5m.

The number of RBC subscribers for business information is also being questioned. RBC maintains that their number is 5,000. "Neither we, nor Reuters has so many subscribers," Prime-TASS Board Chairman Alexey Meleshko said. According to Interfax First Deputy General Director Vladimir Gerasimov, if this data turns out to be false, it will undermine investors' trust in media companies and may hamper the IPOs of other market players.

How do you like the first Russian IPO?

Alexander Lobanov, director for Russian client relations at the Prospekt investment company:

- I was greatly surprised to hear that the company, whose sales were less than $20m, had been 4.5 times oversubscribed. I got an impression that the market has a lot of money to waste, considering the aerial highs of Nasdaq and the meltdown of dot.com shares are still fresh in everyone's memory. I think that investors got quite excited by the well-promoted brand name, not by performance results. Anyway, we will see pretty soon, at least after the publication of this year's results, how reliable the growth forecasts were.

Denis Rodionov, co-director of Brunswick UBS:

- Obviously the underwriters overvalued the company. Additionally, the RBC free float is quite small. However, if market players are ready to pay such a price for RBC stock, it means that the company and its underwriters did a good IPO job and proves that an interest in non-extractive sectors is very strong.

Boris Moshkovich, Russobank vice president:

- Despite the great interest, which has been shown by market participants toward this placing, I cannot call it a full-fledged IPO. In my opinion, analysts' evaluations and the demand for the shares do not draw the picture of a real state of affairs at RBC or the Russian Internet business. I believe that it's nothing more than just a beautiful PR action.

Savastyan Kozitsyn