Onexim, Nafta Moskva decide not to sell shares due to low demand
MOSCOW. Nov 20 (Interfax) - Mikhail Prokhorov's Onexim Group and Suleiman Kerimov's Nafta Moskva have decided not to sell shares in Polyus Gold on the market due to insufficient demand, a source on the market told Interfax on Friday.
The shareholders do not want to sell less than the 5% of shares announced previously, and there is not enough demand to sell that amount in the price range announced earlier, $28-$29 per depositary receipt.
Polyus confirmed this report in a statement, which said: "The sale of shares, which had been announced November 19, will not take place owing to market conditions."
The shareholders wanted to sell 2.5% stakes each, raising a total of $500 million-$550 million, in an accelerated book-build that began on Thursday and was expected to take just one day.
Kerimov owns 36.88% of Polyus via Nafta Moskva and Prokhorov directly and indirectly owns about 40%.
"I don't think the shareholders particularly wanted to sell anyway," said Unicredit Securities analyst Marat Gabitov. "Either that or they wanted to sell for as much as possible. The discount is usually 10%-15%, but they were only offering 5%. Polyus Gold's shares are approaching all-time highs and investors would not have found that an attractive proposition in these conditions," the analyst said.
Uralsib analyst Nikolai Sosnovsky said the press reports early in the week about a 10% SPO gave the market a fright. "The market was very nervous about it, and investors started to sell Polyus Gold shares. The 10% would have been worth about $1 billion, and the concern was that the market simply wouldn't have been able to digest that amount. And Polyus shares started to fall in price."
"The parties to the deal probably wanted to keep it under wraps in order to get a better price, but once information got out the shares were under pressure, and the shareholders just didn't see the sort of situation they had hoped for," Sosnovsky said.
The stock is starting to gain in price now the deal has been called off. "They might recover and Onexim and Nafta might think about selling again in two or three weeks - after all the decision has been reached," he said.
"The shareholders would [then] have enough time and opportunity to sell the holding," said Troika Dialog analyst Mikhail Stiskin. "I think that right now they were more intent on getting a valuation. The stock fell more than 12% since the deal was reported at the start of the week, and the shareholders realize they can sell the shares for more," he said.
"Neither Prokhorov nor Kerimov particularly need cash for their projects right now, so it's not entirely clear why this deal was needed," Uralsib's Sosnovsky said. "Maybe they both think gold prices have risen as much as they can and want to take profit, or maybe they have been planning some joint project that involves raising cash," he said.