By John Helmer, Moscow
Not even the two people usually familiar with the matter were able to convince Bloomberg that there has been genuine demand in the London market for Megafon shares at Alisher Usmanov’s asking price. Instead, as the company and its underwriters tried to sign buyers before the subscription book closed this afternoon, brokerage sources claimed the initial public offering (IPO) was anchored by an order for $170 million. That’s 10% of the shares on offer – if the company is following its undertaking to sell 15% at a base valuation of $11 billion.
While speculation of the identity of the “anchor investor” focused on major investment funds, a source really familiar with the matter claimed that she “wouldn’t be surprised if it is ‘friends and family’. That seems to be the tactic these days.”
A second “anchor investor” also jumped into the breach with a morning announcement from the Stockholm headquarters of TeliaSonera, a minority shareholder in Megafon, which is selling about 10% of the share placement – 28% of its pre-IPO stake. To combat the view in the marketplace that TeliaSonera is a likely seller of the remainder of its stake after the six-month lock-up period expires next May, the company issued this press release: “TeliaSonera’s President and CEO Lars Nyberg intends to participate in the initial public offering of shares in MegaFon through a private investment of USD 2 million. The shares will be purchased at the offer price. Mr. Nyberg is a member of the board of directors of MegaFon.”
Nyberg’s anchor is such a minuscule fraction – 0.12 of one percent – it may not qualify, even metaphorically, as spinach. According to his company’s release, here’s what Nyberg is thinking: “I have a strong belief in the future prospects of MegaFon. As a member of the MegaFon board, making a sizeable investment in the company is a way for me to show my commitment.” The company spokesman was asked to provide copies of press releases issued over the past five years in which TeliaSonera announced private shareholding transactions by its chief executive to demonstrate comparable commitment to the preservation of TeliaSonera’s asset value. Nothing has materialized yet.
According to the annual financial report for last year, TeliaSonera paid Nyberg a total of 22.4 million Swedish krona ($3.5 million), including a cash bonus of SEK3.3 million. Megafon’s IPO prospectus also reveals that Nyberg took his board seat in May of this year, so it’s too early to reveal how much cash he will be paid for sitting and chairing the Megafon remuneration committee. Megafon’s prospectus doesn’t reveal how much it is paying its directors in cash, or in what the document calls phantom share options. Approved by the board of directors just days ago, on October 29, this share option scheme comprises “1.1% of the share capital of OJSC MegaFon (equal to 7,000,000 phantom shares) at the base price of U.S.$17.86 per share.”
How much confidence the rest of the market has that a listing price above that level is sustainable cannot be measured from the IPO formalities. More than one market source in a position to speak authoritatively claims that up to $500 million of the share purchases, or almost a third of the IPO order book, are related-party transactions. Whether this proves to be true or not, the perception right now is that Usmanov’s second attempt to fix a market price for his Megafon shares is as reassuring as Popeye’s famous dictum to Olive Oyl: “I Yam What I Yam An’ Tha’s All What I Yam”.