Polyus will spend almost 580 billion rubles. to buy back shares
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Gold miner Polyus announced the largest share buyback this year. The issuer is ready to spend almost 580 billion rubles, paying 1.4 times the market price. But taking into account the condition of satisfying applications “in the order in which they are received” and the presence of large shareholders, minority shareholders do not count on significant amounts of redemption. The distribution of profits may turn out to be targeted, and not even, experts say.
Polyus shares were the most popular on the Moscow Stock Exchange on July 10. The volume of transactions exceeded 33 billion rubles. This is not only a record value for securities for the entire period of circulation, but also more than for the shares of Sberbank, LUKOIL, Gazprom and Rosneft combined. During trading, the shares were up almost 15% from the previous day’s close. However, following the results of the main session, the quotes stopped just below 11 thousand rubles, which is only 2.6% higher than Friday’s close.
Investors reacted to the decision of the Board of Directors of Polyus to buy up to 30% of shares. The buyback price was set at 14.2 thousand rubles, which is 32.6% higher than the closing price on Friday. That is, the company is ready to spend 579.4 billion rubles. This is the largest buyback program announced by Russian issuers in 2023. Thus, Magnit buys out 29.8% from non-residents (for 67.3 billion rubles). Until the end of the year, the Samolet development group will buy back shares from the market (for 10 billion rubles, see “Kommersant” dated May 30), Norilsk Nickel (about 6 billion rubles), Inarctica (for 1 billion rubles).
According to Poluch’s reporting, as of December 31, 2022, 46.35% belonged to MKAO Wandle Holdings Limited, 29.99% belonged to Akropol Group LLC. The remaining shares are mostly in free float. According to the reporting under RAS, the company in 2022 received a loss of 241.4 billion rubles. Initially, the company’s board of directors planned to pay dividends for last year from retained earnings of previous years, but subsequently revised the decision and recommended that the shareholders’ meeting not pay dividends. However, the annual meeting did not take place due to the lack of a quorum.
Dividends and share buybacks are ways to distribute profits to shareholders. Moreover, companies that buy back shares often “give investors a signal that they believe that the company’s securities are significantly undervalued,” Anna Mikhailova, an analyst at Ingosstrakh-Investments Management Company, notes.
Vladimir Chistyukhin, First Deputy Chairman of the Central Bank, on the sidelines of the Ural Forum “Cybersecurity in Finance” February 17:
“When we are dealing with public joint-stock companies, one of the most significant investment criteria is the prospect of receiving dividends.”
However, in this case, investors are less optimistic. As Alexey Pavlov, head of the Otkritie Investments market analysis department, notes, the nuance of the buyout is that “applications will be satisfied in the order in which they are received” (as the company says).
According to Anna Mikhailova, the lack of a pro-rata rule (proportional distribution) “will not allow all participants to participate in the buyout.” The largest owners with a high probability will apply faster than others and close the possible quota for the redemption of 29.99%, she believes.
As Mr. Pavlov points out, in the case of the terms of the buyout proposed by Polyus, “the distribution of profits may turn out to be targeted, and not even.” And in fact, minority shareholders may have time to sell a very small package of securities in the aggregate, he believes. In general, according to Alexander Tsyganov, director of the investment and corporate business department at Tsifra Broker, a decrease in the share of other shareholders strengthens the position of the main, majority shareholders.
At the same time, the analysts of Veles Capital pay attention that the buyback will be financed both at the expense of own funds and by attracting debt.
According to the investment company, at the end of the first half of the year, Polyus will have about $2 billion in cash (about 182 billion rubles). Therefore, it will be necessary to attract another 400 billion rubles, or $4.4 billion, which will significantly increase the company’s debt burden.
As a result, with such a leverage, the company will focus on debt repayment and will not pay dividends in the current year and, possibly, in the first half of 2024, according to analysts.
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