Russia: Rosneft Debuts On London Stock Exchange
A view of Rosneft's oil field in Taimur (ITAR-TASS)
The beleaguered Russian oil company Yukos contested the IPO, saying it amounted to the sale of stolen property because Rosneft acquired Yukos's main oil-production arm in a disputed auction. But that argument was shot down by a British court.
Early trading today gave credence to the argument by many observers that the Yukos controversy would not prevent Rosneft from finding investors willing to take advantage of the rare opportunity to buy into Russia's booming oil trade.
Opening at $7.55 today, shares of Rosneft on the London exchanges quickly rose nearly 3 percent in early trading (to $7.58 by midday in Central Europe). By midday in London, the price had dropped to the original issue value, but remained stable.
NoShortage Of Interest
Simon Wardell, a senior oil analyst at Global Insight's London office, said many investors are eager to participate in a relatively rare opportunity to invest in Russia's energy sector.
"You're going to see a lot of interest from international companies in terms of gaining access to these sorts of opportunities when they arise," Wardell said. "And they are so infrequent and limited now that, I think, the success of the Rosneft IPO is one that is probably not in isolation."
The IPO -- the largest in Russian history, and among the top five ever in the world -- has attracted the attention of several high-profile investors. Rosneft hopes to raise $10.4 billion through the flotation, the first phase of which was launched on the Moscow exchange on July 17. Rosneft's total value is estimated at $79.8 billion.
China announced today that it purchased a $500 million stake in Rosneft on the Moscow exchange -- and wanted even more. The China National Petroleum Corporation said in a statement that it had sought to purchase a $3 billion stake, but was allocated only one-sixth of that amount.
And analyst Wardell says that the allocation of shares to such companies as European oil major British Petroleum and Malaysia's state oil company Petronas is a show of confidence in Russia's oil sector.
"The listing that is going ahead -- especially the fact that it's been subscribed by a lot of major oil companies such as BP and so on -- shows that there's still obviously huge interest in the Russian oil sector," Wardell said. "An interest in accessing or gaining rights to any company which has strong oil and gas reserves at its disposal."
Overvalued?
Singapore's Temasek Holdings has reportedly decided against acquiring a stake, saying it believes the shares are overvalued.
Critics of the IPO include U.S. lawmakers and financier George Soros, who recently told "Financial Times" that the flotation raises "serious ethical and energy security issues."
The IPO has faced challenges by the beleaguered Russian oil company Yukos, whose main production arm, Yuganskneftegaz, was auctioned off by the Russian state two years ago to settle a tax bill. Rosneft took control of Yuganskneftegaz as a result, instantly making it one of Russia's largest energy producers.
Yukos had hoped to block today's IPO by arguing in court that the Yuganskneftegaz acquisition was illegal and constituted the sale of stolen property. But Britain's High Court struck down the argument on July 18.
Yukos has vowed to continue to challenge the sale.