By brokerage account – Kommersant FM
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The Central Bank pointed to excessive broker commissions for IPO participants. The regulator’s leadership believes that intermediaries often take advantage of the excitement surrounding a successful initial public offering. Brokers, as noted by the Central Bank, charge investors up to 5% of the value of the securities that their clients ultimately receive.
If this practice becomes widespread, it may reduce interest in IPOs, says Sergei Suverov, investment strategist at the Ari-Capital management company. In his opinion, the Central Bank will probably have to intervene in the situation: “Recently, the regulator has been paying particularly close attention to the IPO market, and this is no coincidence, because through this mechanism the real sector of the economy is financed and the capital market is developed. This is beneficial both to issuers, who receive funds for their development, and to investors, who receive an additional investment instrument.
It is clear that there are people who want to make money from the IPO process, and these are primarily brokers, who often charge illegal commissions. There are cases where they charge commissions on the entire application amount that the investor submits.
The application may only be partially satisfied, and therefore the player may end up paying up to 5% commission on the transaction amount. This is, of course, a fairly significant figure. And it’s a problem that could limit the market’s potential and discourage private investors from participating in IPOs. Therefore, I think the Central Bank will take measures. First of all, there may be some kind of informal agreements with brokers in order to get away from this practice and so that commissions are only from real shares that investors receive.”
Most likely, the intervention of the Central Bank in the current situation will not be required, says Dmitry Alexandrov, managing director of the investment company Ivolga Capital. In his opinion, the problem of inflated broker commissions will disappear by itself when the number of IPOs increases significantly: “In fact, only last year was an IPO boom for private investors; before that there was a pause. But still, the number of placements was quite small, and due to the fact that these are still some one-time stories, brokers may have some not very convenient conditions, both in terms of commissions and in terms of simply their access.
As soon as the IPO ceases to be a curiosity (and everything is heading towards this now; a significantly larger number of transactions are expected this year than in 2023), it will become a fairly common operation for any broker and client, which will inevitably lead to lower commissions and improved technical access.
So, first of all, it is not the Central Bank, but investors who will vote with their feet. Where access is expensive and inconvenient, clients will simply start leaving, and the broker will be forced to change its approaches to pricing.
As for the regulator, I don’t think there is a serious problem here to introduce any separate regulation or give any official clarification. After all, these are commercial terms between the client and the broker, and the Central Bank is unlikely to interfere in this. Therefore, I think everything will be limited to some kind of verbal interventions.”
Eight new issuers went public in 2023, with private investors actively participating in these IPOs. In some placements their share reached 85%, and in total they bought out more than half of the shares that appeared on the market. This year, two players have already held an IPO – the car sharing service Delimobil and the IT company Diasoft.
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