Rosneft Fixed IPO Cost of its Stock

The final parameters of Rosneft IPO set the stock price at $7.55, which corresponds to capitalization of $80.89 billion, Russian business daily Kommersant reported.

As no strategic investors have apparently amassed sizeable stakes in Rosneft, YUKOS will maintain 9.33 percent even after consolidation of this oil company. Therefore, to prevent emergence of a big but undesirable holder in Rosneft, Rosneftegaz will have to pay the market price of $7.55 billion for the stake in it in time of YUKOS bankruptcy.

The IPO cost of each stock or a global deposit receipt (GDP) of Rosneft has been fixed at $7.55. Rosneftegaz (holder of 100 percent less a stock in Rosneft) will place 1.126 billion stocks of the oil company and Rosneft will launch 253.87 million stocks, sanctioning the global coordinators (ABN Amro, Dresdner Kleinworth, JP Morgan and Morgan Stanley) to additionally buy out 52.98 million stocks under the option.

Rosneft is willing to derive $10.4 billion from the placement. The question is why the company reasoned against earning additional $2.4 billion, which it would have generated from placing all stocks laid aside for initial public offering.

Russia?s government sanctioned Rosneftegaz to place 1.356 billion stocks through IPO (so 230 million won?t be placed), and Rosneft preferred to retain 93 million from the new issue of 400 million stocks despite that the market has hailed the price of $7.55, judging by the 1.5 fold oversubscription reported by Rosneft.

Therefore, it seems the matter at stake is the control of the company rather than the funds generated. Placing all stocks would leave Rosneftegaz with just 72.2 percent in the consolidated company, but keeping 323 million out of IPO means the qualified majority of 75.2 percent to 75.7 percent depending on the banks? desire to use the option.

Rosneft has apparently accomplished all tactical and financial tasks set for IPO. Rosneftegaz will retain over 75 percent in it and derive enough funds to pay off the debt. Once the debt is settled, it will have $3 billion left to fund investment projects and operating activities of Rosneft.

But the success has a significant side effect. By winning this lucrative price for IPO, the Kremlin has fixed the very high price for the YUKOS-owned stake in Rosneft. YUKOS is the holder of 13 preferred stocks of Yuganskneftegaz. Those stocks are converted into 1 billion stocks of Rosneft under the merger terms of its former production arm into the state oil company. It equals 9.33 percent in the consolidated company, which could be compared to the whole worth of IPO and which market price has fetched $7.55 billion thanks to it.