What awaits the Russian IPO market in the fourth quarter of 2023

A revival in the Russian IPO market is expected in the fourth quarter. Any retail investor can participate in initial placements by submitting an application through the mobile application of an investment company or bank. It is worth considering that many brokers set a minimum amount for such investments, and the application itself, depending on the overall demand, may not be satisfied in full. And you should never neglect studying the company’s business, the markets where it operates, competitors or peers whose shares are already traded.

The rise of “Astra”

The main event of the past week on the stock market was the IPO of the Astra group, the largest Russian developer of OS and infrastructure software. The company announced the start of collecting applications for 10.5 million shares (5% of capital) on October 5, and on October 12 it closed the book with more than 20 times oversubscription. The shares were placed at the upper limit of the initial range – 333 rubles. As a result, the placement volume amounted to 3.5 billion rubles, and the company itself was valued at 70 billion rubles. Unsatisfied demand manifested itself in secondary trading, and by the end of Friday, the company’s capitalization increased by 40%, to almost 100 billion rubles.

This is the third public offering of shares on the Russian market this year, but the most successful of them. In the first two, placement volumes were many times smaller: “Genetico” — 179 million rubles, “SmartTechGroup” (the main asset is the Karmani multifunctional complex) – 978 million rubles. The strong result of the Astra group was made possible, among other things, due to high demand from institutional investors who did not participate in previous placements. However, as the company noted following the placement, priority allocation was provided to small applications from retail investors.

Book collection

By the end of the year, market participants expect several new names to appear. In particular, plans for an IPO were announced network of gas stations “Eurotrans”, online clothing store Henderson, Kaluga distillery “Crystal”the placement of shares of a systemically important SovcombankA. Any private investors with a brokerage account can participate in them. To do this, they must submit an application in any way available to them: through their personal account or mobile application, by written or oral instruction to the broker.

The deadline for submitting it is determined by the placement organizer and can vary from several hours to several weeks. “The underwriter sends to the stock exchange a proposal to place the issuer’s securities. The platform, based on the trading rules and underwriter’s information, forms the placement procedure, which determines the deadlines for collecting applications and other conditions,” notes Digital Broker.

However, an investor will not be able to participate in the placement with any amount of funds, since brokers usually set a minimum application size.

“In some cases there is a price threshold – for example, participation becomes available from 100 thousand rubles. or from 1 million rubles. These conditions depend on the business model and conditions of each professional participant,” notes Andrey Borodavka, head of the department for working with key clients at Veles Capital Investment Company. According to Alexey Kurasov, head of the corporate finance department of Finam Financial Group, some retail brokers can place an order for one lot (one share).

In the application, the investor must select the volume of securities of interest and the price within the price range previously established by the organizers at which he is willing to buy them. It is worth remembering that you can cancel your submitted application within a limited time. This can usually be done before the broker submits a cumulative order from all clients; some large brokers allow the order to be marked while the order book is open. “An investor can submit an application at the organizer’s price, and then it will go through at the price at which the placement will be,” notes Igor Pimonov, head of the department of the Internet broker BCS World of Investments.

Limited Issues

After the order book is closed, the placement organizers, together with the issuer, decide on the distribution of securities among investors. Usually by this time the question of the placement price has already been determined based on the analysis of the collected book. The final allocation depends on oversubscription and can vary from 100% to zero. “The regulations for the placement by the underwriter may indicate the specifics of the allocation, including that the agent can satisfy applications at his own discretion,” noted the Digital Broker.

The deadline and time for satisfying applications are determined at the stage of publishing information about placement.

Most often, securities arrive at the brokerage account the next day after the placement price is determined.

“If during the period of satisfaction of applications the security did not appear on the account, this means that the application was not satisfied,” emphasize the Digital Broker. Igor Pimonov draws attention to the fact that in the absence of additional conditions during the placement, clients will be able to trade these securities immediately after the conclusion of the placement transaction, on the first day of trading.

Risk accounting

However, investors should remember that an initial public offering is a riskier investment than buying a stock on the secondary market that has a trading history. Therefore, it is necessary to study in advance the markets in which the issuer operates, its business model, and financial indicators. It is worth finding trading competitors and understanding at what discount the new issuer will be placed with them.

The purpose of the placement and what the funds raised will be used for are important.

“If less than 70% of the placement goes to development, and 30% or more goes to cash-out (exit of current shareholders from the business), then forecasts for multiple business growth most likely will not be realized – no one wants to leave a growing business,” – notes Alexey Kurasov.

Vitaly Gaidaev