Going Public in
Russian Securities
Market
Alexei Rybnikov
CEO
MICEX Stock Exchange
IPO for Russian Issuers:
Pros and Cons
Benefits of going public
– Ability to raise capital rapidly when needed
» acquisition currency
» liquid market for the company’s stock
» expanding shareholder base
– Strengthening balance sheet to support future growth
– Increases valuation (reduces illiquidity premium)
The dark side of IPO
– Losing full control of the process – market dictates
final outcome
– Underpricing - market price may not reflect true value
of the firm
– Focus shift – from long-term to short-term goals
2
Choice of Venue:
Issuer Perspective
Factors to consider:
 Deal size
 Target investor base
 Critical mass of liquidity
 Legislation
 Cost
 Story
3
Choice of Venue:
Issuer Perspective
Factors to consider:
 Deal size – up to US$ 500 million
 Target investor base - mix of buy-and-hold
and active traders
 Critical mass of liquidity – at all times
 Cost – at issuance and maintenance
 Story – compelling
4
A CRITICAL NEED
Domestic Market
5
MICEX Group: the national
financial infrastructure
St.-Petersburg
Novosibirsk
N. Novgorod
Moscow
Samara
Rostov-on-Don
Yekaterinburg
Vladivostok
6
Domestic Market in Figures
 MICEX Stock Exchange’s
share in Russian stock
market turnover exceeds
85%
 Turnover in 2005 reached
US$ 225,6 bln, 49,2%
increase over 2004
 Volume of transactions in
Jan-Feb 2006 - US$ 69,6
bln, 3,4 times over Jan-Feb
2005
Turnover of Russian stock exchanges
in 2003-2006, US$ bln
2003
2004
2005
JanFeb
2006
MICEX
99.1
151.2 225.6
69.6
RTS
13.3
26.1
15.8
36.5
7
MICEX Stock Exchange:
Stock Market Up-and-Coming
MICEX SE Market Cap 2004-2006, US$ bln
600
553,36
500
518,22
400
300
273,64
200
100
151,43
0
31.12.04
31.12.05
01.02.06
01.03.06
8
MICEX Stock Exchange:
Liquidity Growth
MICEX SE Average Daily Turnover 2005-2006, US$ bln
2,19
2,17
Mar 06
2,00
Feb 06
2,50
1,75
Oct 05
0,77
1,22
0,85
Jan 06
Apr 05
Mar 05
Feb 05
0,00
Aug 05
0,58
0,49
Jan 05
0,75
Jul 05
0,84
May 05
0,50
0,74
Jun 05
0,71
1,20
Dec 05
1,31
1,00
Nov 05
1,30
Sep 05
1,50
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MICEX Stock Exchange:
Start in Gazprom
100%
 MICEX SE
trading volume 80%
is over 41% of
60%
the total
market
40%
20%
RTS OTC
RTS exchange
MICEX SE
13.03.2006
07.03.2006
02.03.2006
27.02.2006
21.02.2006
16.02.2006
13.02.2006
08.02.2006
03.02.2006
31.01.2006
26.01.2006
23.01.2006
0%
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Issuers on MICEX Stock Exchange
Number of issuers on MICEX SE
(at begining of the month)
Issuers on MICEX Stock Exchange
January
1, 2003
Total
number
of
issuers
157
January
1, 2004
225
January
1, 2005
241
January
1, 2006
418
March
1, 2006
461
262
March 2006
185
244
January
2006
161
179
January
2005
Issuers
of
equities
85
Issuers
of
bonds
82
91
81
161
81
185
152
January
2004
152
179
244
262
91
82
January
2003
85
0
50
100
Equities
150
200
250
300
Bonds
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MICEX Stock Exchange:
Investor Base
Type of Investor
Private Investors
Number of
Investors
(16.03.2006)
130 301
Nonresidents
1 203
Legal Entities
20 208
Institutional Investors
4 752
Total
156 464
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MICEX Stock Exchange:
Cash Equities
 294 securities of 185 issuers
traded
 50 equities of 34 issuers
listed, including all blue chips
 2005 equities trading volume
reached US$ 141,8 bln,
30,6% increase over 2004
 Volume of transactions with
equities in Jan-Feb 2006 US$ 49,6 bln, 4 times over
Jan-Feb 2005
bln USD
Volume of transactions and
MICEX Index
60
points
1200
50
1000
40
800
30
600
20
400
10
200
0
0
IQ 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2002
2003
2004
2005
13
MICEX Stock Exchange:
Corporate and Regional Bonds
 375 bonds of 262 issuers
traded
 US$ 24,2 bln (par value) total
outstanding
 114 bonds of 67 issuers listed
 2005 turnover in bonds
reached US$ 83,8 bln, 2 times
over 2004
 Volume of transactions with
corporate and regional bonds
in Jan-Feb 2006 - US$ 20 bln,
2,4 times over Jan-Feb 2005
Par value of outstanding corporate and
regional bonds, US$ bln
25
20
15
10
5
0
1Q 2Q 3Q 4Q IQ 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2002
2003
2004
2005
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Corporate Bond Market:
Proxy for IPOs
 Market value of corporate bonds
has grown 6,2 times during 20032005
 Market value of corporate bonds
in Jan-Feb 2006 has increased by
28,1% to 12,3 bln USD
 The biggest issuers of bonds (in
terms of nominal value):
 RZhD – 1.17 bln USD
 Gazprom – 0.89 bln USD
 Vneshtorgbank – 0.71 bln USD
bln USD
10
9
8
7
6
5
4
3
2
1
0
1H
2002
2H
2002
1H
2003
2H
2003
1H
2004
2H
2004
1H
2005
2H
2005
15
MICEX Stock Exchange
Among Peers
Volume of trades on equities market
in January 2006 and number of issuers
NYSE
NASDAQ
London SE
Tokyo SE
Euronext
Deutsche Borse
Hong Kong Ex&Cl
Shanghai SE
MICEX SE
Singapore Ex
Wiener Borse
Warsaw SE
US$ bln
Number of issuers
1387.6
1107.2
603.4
568.7
282.8
221.4
60.0
27.8
19.7
12.2
5.9
4.9
1817
2821
2753
2325
962
645
1127
833
170
566
91
234
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Russian Legislation & Regulation:
Recent Developments (2005-2006)
More issuer & investor friendly
Shorter IPO cycle
30% rule
RDR
Transparency
Corporate Governance
Investor Protection
National Infrastructure
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Future Prospects
Market is Ready
Infrastructure in Place
Regulation Inviting
Next Steps:
 Dual Listings
 Strategic Cooperation & Partnerships
 Real Working Mechanisms
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Contacts
Address: 13, B. Kislovskiy per.,
Moscow, 125009, Russia
Telephone: (+7 095) 234-4811
Fax: (+7 095) 705-9622
E-mail: info@micex.com
Web-server: www.micex.com
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