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Russia: Company Reportedly Mulling NASDAQ Listing

  • Nikola Krastev

A Russian technology company says it's seeking a primary listing on a major Western stock exchange, possibly the U.S. NASDAQ. If the company succeeds in getting a NASDAQ listing, it would be the first company from Eastern Europe or the former Soviet Union to trade directly on the world's second-biggest exchange. Correspondent Nikola Krastev reports the listing could pave the way for other regional companies in the future.

Prague, 28 November 2000 (RFE/RL) -- Russia's biggest information technology company, IBS Group, is seeking to trade its shares on a major Western stock market, possibly the U.S.-based NASDAQ stock exchange.

Although plans for the listing are still in the early stages, the vice president of the company, Yevgeni Peskin, tells RFE/RL the company hopes to trade its shares on a Western exchange by the end of next year:

"Whether the listing is going to happen on NASDAQ depends on certain criteria, like the advice of our investment bankers, market conditions, etc. There's no certainty that it will be NASDAQ. It could be E-Markt in Frankfurt or the London Stock Exchange. It's still in the works."

Companies choose to list their shares on stock markets in order to raise money. It's often seen as a cheaper way of raising investment funds than borrowing the money directly from banks or private individuals.

IBS accounts for about 10 percent of Russia's growing information-technology market, with sales estimated at about $200 million last year. The company was set up eight years ago by Anatoly Karachinsky, who is its current president and chief executive officer. Much of IBS' success is due to its sale of computers made by the U.S.-based Dell company in Russia.

Several Russian companies are already listed on U.S. exchanges, including gas giant Gazprom and telecommunications company Rostelecom. But those shares are not traded directly on the exchanges. They are sold to investors in the form of ADRs [that is, American Depositary Receipts], with the companies' primary listing being on other -- usually local -- stock exchanges.

IBS would be the first company from Eastern Europe or the former Soviet Union with a direct listing on the NASDAQ. Its experience would be closely watched by other large companies in the region.

Analysts say a primary Western listing would enhance IBS' prestige in the eyes of investors. A listing on NASDAQ, the world's second-biggest stock exchange, would be especially desirable because of the exchange's huge size, stringent reporting requirements and liquidity.

But they point out a successful listing is by no means guaranteed.

Investors -- especially smaller, private investors -- are still hesitant to invest in Russia after the country's economic crisis in 1998. U.S.-based technology analyst Scott Delangio says:

"Russia is one of those unfortunate places that a listing from which is not really that attractive [to Western investors]"

Analysts also say investors' appetite for shares in technology companies is declining. Average stock values on the NASDAQ, which lists shares of many technology companies, have plummeted this year as investors withdraw money from relatively risky stock market investments. The main index for the NASDAQ has dropped about 40 percent in the past year and there's no sign yet that interest in technology stocks will pick up any time soon.

Aleksandr Andreev, a technology analyst at UBS Warburg in Moscow, is optimistic about IBS' prospects. His brokerage firm is advising IBS on its listing.

Andreev says IBS is one of the few companies in Russia that is large enough and sufficiently focused on its core activities to even think about listing. He also says it is one of the few local companies where Russian information professionals want to work.

"First, the vision that the [IBS] management has. They are one of the few companies that have a long-term vision in terms of where the business is going. The other thing is the team they have built. I met a lot of competitors of IBS and there are very few companies where there is a high quality management both on the top level and on the middle level."

It's too early to speculate on how much the listing might bring the company in fresh investment capital. Andreev says a listing could raise anywhere from $15 million to $200 million. A lot will depend on the timing of the listing and investors' interest in putting their money both in technology stocks and in Russia.