equity financing alternatives for russian companies on the london stock exchange october 20, 2006
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Equity financing alternatives for Russian companies on the London Stock
Exchange
October 20, 2006
October 2006 2
Company growth
Growth
Independent Market ExpertiseRecommendations on how to maximise the value of
joining a London market
The LSE supports customers in maximising shareholder value through supporting capital raising and generating liquidity whilst maximising
opportunities from their increased profile
CapitalRaising it
efficiently & effectively when
required
ProfileMaximising
marketing/PR opportunities
LiquidityIncreasing and
maintaining liquidity
October 2006 3
0
2000
4000
6000
8000
10000
12000
14000
16000
London New York Boston SanFrancisco
LosAngeles
Chicago Paris Frankfurt Munich
Equity ($, billion)
$7
,58
4
$3
,08
1
Volume of Assets Managedin Financial Centres, 2005
Fund management activities in the UK are concentrated in a single location (London) rather than geographically spread of different centres
Source: Big Dough, Hemscott (September 2005)
October 2006 4
Oxera’s new analysis confirms that the findings of the 2003 Torstila study continue to apply now. The Oxera analysis is based on a sample of all IPOs on the LSE, NYSE, Nasdaq, Euronext and Deutsche Boerse during the period from January 1st 2003 to June 30th 2005, for which underwriting fee data was available in Bloomberg.
Source: The Cost of Capital - An International Comparison, June 2006
The gross spreads of IPOs on the US exchanges are found to be the highest, averaging 6.5% for the NYSE sample and 7% for Nasdaq IPOs. In comparison, median spreads of IPOs on the LSE’s Main Market are 3.25% and those on AIM
somewhat higher at 4%.
Cost of Capital in London: Oxera Research
October 2006 5
Total New Issues for the International Main Market 2003, 2004, 2005 and 2006 compared
0
1
2
3
4
Nu
mb
er o
f Co
mp
anie
s
2003 2004
2005 2006
London continues to attract int’l companies
Source: London Stock Exchange, August 2006
October 2006 6
Int'l IPOs in 2005 (£,m)
31141
718
12519
312232
61
907
531
148 91
435
13017
333 353
0100200300400500600700800900
1000
FR
UT
.LI
KU
MH
O
SS
A.L
I
UT
I
SR
I.L
I
FIV
E.L
I
EV
R.L
I
AG
C.L
PR
TY
.L
NV
TK
.LI
88
8.L
BK
M.L
I
INV
ES
T
AM
V.L
I
RE
A.L
I
TE
EG
.L
NL
MK
.L
Feb-05 Mar-05
Apr-05
May-05
Jun-05 Jul-05
Oct-05 Nov-05 Dec-05
In 2005, 17 Int’l Companies raised approximately $8 billion in London
International IPOs in London, 2005
Source: London Stock Exchange, August 2006
October 2006 7
Int'l IPOs in 2006 (£,m)
1,586564 250 66 35 52 129 304
3,581
100
1,0002,0003,0004,000
LO
TT
E
CO
MS
TA
R
KIN
GD
OM
GO
LD
EN
PO
RT
CA
RA
DO
R
RO
LT
A
CH
ER
KIZ
OV
O
CO
LT
TE
LE
CO
M
RO
SN
EF
T
NA
PO
PH
AR
MA
Feb-06 Mar-06 Apr-06 May-06 Jul-06
In the first eight months of 2006, 10 Int’l companies have raised over $12 billion in London
International IPOsin London, 2006 YTD
Source: London Stock Exchange, August 2006
October 2006 8
Top 10 companies traded on IOB – Jan-Jul’06
Source: London Stock Exchange trade statistics
41,46337,124
9,511 9,368 8,3326,435 6,075
4,206 3,083 2,909
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
LUK
OIL
OA
O
GA
ZPR
OM
OA
O
UN
IFIE
D E
NE
RG
YS
YS
TEM
S O
FR
US
SIA
SU
RG
UTN
EFT
EG
AZ
MM
C N
OR
ILS
KN
ICK
EL
OR
AS
CO
MTE
LEC
OM
HLD
GS
S.A
.E.
SA
MS
UN
GE
LEC
TRO
NIC
S C
O
RO
SN
EFT
OJS
C
NO
VA
TEK
OA
O
LOTT
E S
HO
PP
ING
CO
0
20,000
40,000
60,000
80,000
100,000
120,000Total trading Values ($ million)
Total no of trades
October 2006 9
Main Market(London listed, DR issuer)
London listing
(regulated)
IOB
Professional Securities
Market(exchange regulated)
IOB (U)
Source: London Stock Exchange - July 2006
Case Study: London – a leader in international trading
In 2005, IOB total trading turnover was $131bln and in the 7 MNTHS 2006 of $172bln.
Trading of DRs on International Order Book (2001 - 7 MNTHS 2006)
-
20
40
60
80
100
120
140
160
180
200
2001 2002 2003 2004 2005 7MNTHS2006
Tra
de v
alue
$ b
illion
0
100
200
300
400
500
600
Tra
des
'000
Turnover $
Trades
October 2006 10
Rosneft ownership structureRosneft ownership structure
Pre-IPO Post-IPO
Russian government viaRosneftegaz 100% Other free float 13%
Rosneftegaz 75%
Consolidation minorities 12%
•Strategic 21%
• Russia instl• 39%
•Retail 4%
• Intl institutional • 36%
Demand splitDemand split
•Shares Sold: Ordinary Shares (~41%) & GDRs (~59%)
•Offer Size: $10.4 Billion (pre-Green Shoe) and $10.6 billion
•Post IPO Market Cap: $80.2 Billion
Rosneft: 30/70 in Action
Source: JP Morgan
October 2006 11
Key differences between our markets
Pre-vetting of admission documents by the UKLA Compliance required with the rules of the UKLA Normally a three-year trading record required Minimum of 25% shares in public hands Prior shareholders approval for certain transactions Sponsors needed for certain transactions
Regulation by the LSE No trading record required No minimum amount of shares to be in public hands In most cases, no prior shareholder approval required
for transactions Normally, admission documents not pre-vetted by
Exchange or UKLA but by nominated adviser Nominated adviser required at all times
Main Market
12
AIM for Russia
2006 – A Record Year for Capital Raised*
Source: London Stock Exchange, September 2006, *Includes further capital raises
Total Money Raised ($m)
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 30-Sep-06
$1
6,9
97
$1
9,4
06
13
AIM for Russia
2006 – 199 IPOs have raised close to $11 Billion
Source: London Stock Exchange, September 2006
7
22
44
26
31
21
17 19
12
$20
$69$73 $73
$43
$62
$33
$44
$24
0
5
10
15
20
25
30
35
40
45
50
Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
0
10
20
30
40
50
60
70
80
Number ofCompanies
Avg Raise ($,m)
14
AIM for Russia
2006 – Top 10 Sectors By IPO Capital Raised
Source: London Stock Exchange, September 2006
17
36
13 12
3
14
4
22
11 10
0
500
1,000
1,500
2,000
2,500
3,000
Real Esta
te
Gener
al Fina
ncial
Equity
Inve
stment
Instr
umen
ts
Trave
l & L
eisure
Indu
stria
l Metal
s
Softw
are
& Com
pute
r Ser
vices
Constru
ction
& M
ater
ials
Mini
ng
Med
ia
Suppo
rt Ser
vices
0
5
10
15
20
25
30
35
40
Money raised $m
Number of IPOs
15
AIM for Russia
Russian Assets on AIM – A Sizeable Peer Group
Source: London Stock Exchange, August 2006
Further $ Raised
Amur 15.03.2006 37 54 7.8 0Aricom 31.12.2003 344 27 7.6 192Aurora Russia 24.03.2006 128 143 142.6 0Baltic Oil Terminal 27.04.2006 153 116 43.7 0Bema 30.12.2003 1,932 N/A N/A 241Celtic Resources 14.10.2002 192 68 9.6 57Highland Gold 17.12.2002 452 399 38.0 190Imperial 05.05.2004 663 4 1.6 342IMSG 06.12.2005 60 110 15.2 0
Peter Hambro 29.04.2002 1,703 68 20.6 124Rambler Media 15.06.2005 363 160 41.7 0Raven Russia 29.07.2005 841 291 290.8 589Sibir 12.06.2000 2,384 N/A N/A 312Trans-Siberian 25.11.2003 54 82 30.4 15Urals Energy 09.08.2005 833 395 139.9 232Zirax 16.12.2005 44 49 14.7 0
Totals: $10,181 $804.2 $2,294
Company Admission Date Market Cap Today ($,m)
IPO $ Raised
Market Cap at IPO
16
AIM for Russia
Access to Capital - both at IPO and after
CIS Companies - Money Raised on AIM ($,m)
1,200
2,784
0
500
1,000
1,500
2,000
2,500
3,000
IPO $ Raised Further $ Raised
Source: London Stock Exchange, August 2006
17
AIM for Russia
AIM Supports Growth Companies
371
269
519
833 841
162
0
100
200
300
400
500
600
700
800
900
Max Petroleum Urals Energy Raven Russia
Market Cap at Admission ($,m)
Market Cap Today ($,m)
11 M
onth
s
13 M
onth
s
14 M
onth
sSource: London Stock Exchange Statistics, September 25, 2006
18
AIM for Russia
Prospectus Preparation
Underwriting and analytical coverage
Broker
NOMAD
Company
Short-form report
TechnologyExperts
Reporting Accountants
Legal reports and negotiations
Law Firm(NOMAD’s)
Law Firm(Corporate)
Public Relations and Investor Relations
Listing and trading Services
Stock Exchange: AIM
RegistrarPR firms
IndependentResearchersLHC
3 - 5% of the deal, plus1% of the firm
£150K- £300K,Of which NOMAD’sLawyers get 25%- 40%
£100K- £150K
£25K- £50K£10K
IPO Process Cost Structure (AIM)
£150K- £200K plus1% of the firm
Total costs to raise £50m,Excluding value of options:
£2,500K - £5,000KOverall costs range: 5%-10%
CREST Co
Source: Oxford Said Business School MBA Project, August 2006 as amended by London Stock Exchange
October 2006 19
WWW.LONDONSTOCKEXCHANGE.COM/RU/AIMJon EdwardsSenior Manager, CIS Desk+44(20) 7797-1599jedwards@londonstockexchange.com
Contact Details
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