Gold mining company Yuzhuralzoloto (UGK) has completed collecting applications for its IPO. Based on the results of a seven-day collection of applications, the book was oversubscribed at least three times, Kommersant sources claim. Institutional investors showed high interest in the securities, attracted by the discount at which the placement was carried out. It is possible that with such a pricing policy, stock quotes will not fall on the first day of trading, as happened in the last two initial offerings on the Russian market.
On Tuesday, November 21, UGK closed the book of applications for the placement of shares as part of the IPO. Based on the collection results, according to three Kommersant sources on the market, the book was oversubscribed more than three times. “In the first days, the collection of applications (started on November 13) was not very active, and by the end of last week the book was signed only 1.5 times. But since the beginning of this week, investor activity has increased sharply,” a Kommersant source noted.
According to two Kommersant interlocutors, the placement price will be closer to the lower limit of the previously established price range of 55–60 kopecks. per share. “There were large applications at this level, and the organizers did not propose to revise them. But, since interest has grown noticeably in recent days, it is possible that the placement price may be raised,” notes one of them. The final allocation and placement price will be announced by the issuer on November 22. In case of placement at the lower limit, the company will receive 5.5 billion rubles, and the company’s capitalization, taking into account the additional issue, will be 115.5 billion rubles.
Institutional investors took an active part in the placement, although less actively than in the IPO of the IT company Astra Group (see Kommersant on October 12). According to a Kommersant source, about half of the total demand for SGC shares came from such investors. “The book of applications turned out to be of very high quality, there are many large private investors and institutions,” noted another Kommersant interlocutor on the market. According to a Kommersant survey of portfolio managers of large management companies, many said that they submitted orders ranging from several million to hundreds of millions of rubles. “We are participating in the placement of SGC, but for a small amount,” notes Ivan Lavrinenko, director of investment at Era Investment Management Company.
Managers’ interest in shares of a gold mining company is related to the fundamental attractiveness of the business. Yuzhuralzoloto is the second company in Russia in terms of reserves, which amount to 1.3 thousand tons. “The investment program provides for increasing production from the current 451 thousand to 750 thousand ounces by 2026. Such an increase in production can double the company’s revenue,” estimates Daniil Bolotskikh, leading analyst at Tsifra Broker.
At the same time, market participants note the high sensitivity of the company’s value to changes in gold prices and the dollar exchange rate. Therefore, in particular, the organizers of the placement assessed the potential value of the company in a wide range – 130–180 billion rubles. “In fact, a 10% decrease in both parameters reduces the fair value of the company by more than 40%. Also, an increase in financial indicators is expected most likely from 2025, which slightly increases the risks of implementing a positive scenario,” notes Ivan Lavrinenko.
To increase the attractiveness of the placement, the issuer placed shares at a discount not only to the estimates of the organizers, but also to its closest competitors. “The owner of the company did not pursue the maximum price that could be obtained at the IPO, preferring to set a lower price compared to other companies in the sector, so that after the placement of the securities they would receive positive dynamics on the stock exchange,” notes Finam FG analyst Alexey Kalachev .
In this regard, market participants do not rule out that at the first secondary trading on Wednesday the shares will not fall in price, as happened with the securities of Henderson (see Kommersant on November 3) and Eurotrans (trading closed on November 21 at a price almost 11% lower than the offering price). However, the market is also not expecting strong growth, like after the placement of Astra Group (see Kommersant on October 17). “If the organizers cut the orders of flippers (investors entering assets for short periods.— “Kommersant”) from among private investors, the company’s shares, taking into account the discount, can grow if market conditions are favorable,” notes one of the portfolio managers.
In general, managers negatively assess the increasing practice of placements at inflated prices. According to Ivan Lavrinenko, an IPO should not exist as a method of selling a business, but as a method of obtaining an objective market valuation for a business. “After the shares enter the market, you can use it for the secondary sale of securities in those volumes that are of interest to key shareholders already in the SPO format,” he believes.