Why do Russian companies conduct IPOs abroad?

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Why do Russian companies conduct IPOs abroad?

Everything is obvious: the capitals are in the West — that’s why companies from all over the world, including Russian ones, place their securities there. Recently, IPOs in China have been gaining popularity — because the local capital market has also swelled to a fair scale, so many people are trying to attract Chinese money.

Western and eastern investors are in no hurry to visit Russian sites — for many reasons (the protection of property rights is not enthusiastic, the market capacity is orders of magnitude smaller, etc.). Theoretically, of course, there is a lot of capital in Russia, but this is only if you look formally: it is clear that most of the free assets owned by large businessmen and some policies are placed not on accounts in Sberbank, but in Western offshore companies, funds and banks. In such conditions, the behavior of Russian firms seeking placement in the West is quite natural.

Why don’t all companies go IPO?

Conducting an IPO is not profitable for everyone and not always. In 20 years, the number of public companies in the United States has decreased from eight thousand to more than four thousand. High-tech companies are not in a hurry to enter the stock exchange at all. In 2016, only 14 companies from the IT sector entered the IPO (in 1999 there were 371 of them).

The status of a public company is still extremely important for those who work with large corporations and the public sector. But some analysts believe that the IPO does not accelerate, but slows down the development of the issuer. After all, public companies are under constant pressure from investors and spend a lot of effort on bureaucratic procedures. As the saying goes, “to become successful, it does not necessarily become public.”

But the opposite also happens. The Evernote notes service in 2012 was one of the first in the list of “unicorns”. “Unicorns” are startups with a market value of more than $1 billion. In 2011, Evernote was recognized as the “Company of the Year” by Inc. magazine. In 2014, Unicorn’s annual revenue was about $36 million. A year later, the audience exceeded 100 million people in 193 countries.

However, in 2016, the company sharply cut costs, refused bonuses, cut 18% of employees and closed three out of ten offices. Nevertheless, the management of Evernote, oddly enough, plans to improve the financial situation by conducting an IPO.

External author: Marat Tsaturyan

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