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Russian President Vladimir Putin speaks during his address to the nation at the Kremlin in Moscow on Feb. 21, 2022.

Russian President Vladimir Putin speaks during his address to the nation at the Kremlin in Moscow on Feb. 21, 2022. (Alexey Nikolsky/Sputnik/AFP/Getty Images/TNS)

Sanctioned or unsanctioned, Russian billionaires face fresh hurdles after President Vladimir Putin dropped the curtain on the era of foreign stock listings.

Putin signed off on legal amendments on April 16 that require Russian companies to delist their overseas shares, winding up a process that has gathered pace with the annexation of Crimea in 2014.

That could force tycoons including Russia’s richest man, Vladimir Potanin, as well as steel billionaires Vladimir Lisin and Alexey Mordashov, to reconfigure the ownership structure of businesses they hold -- in part -- via overseas shares paying foreign-currency dividends.

“Most companies and their main shareholders who had a listing or depositary receipts abroad won big from the financial freedoms and economic ties with the West,” said Anton Zatolokin, head of research at Otkritie Broker. “By destroying what took 30 years to build, they take a direct and indirect hit.”

Few things in the late 1990s and 2000s showcased Russia’s rising economic clout and global financial integration better than the country’s biggest companies, like MMC Norilsk Nickel and Lukoil, registering depository receipt programs in New York, London and Frankfurt.

From a peak of $17 billion in 2007 alone, Russian initial public offerings abroad have faltered in recent years, data compiled by Bloomberg show. Such listings have raised only $6 billion in total since Russia’s annexation of Crimea in 2014, when international sanctions showed how vulnerable businesses were on foreign markets as geopolitics took a turn for the worse.

Some tycoons seized on the slump in their companies’ share price to increase their positions. Lukoil Chairman Vagit Alekperov has regularly purchased depositary receipts from the market over the years, Bloomberg calculations show.

Since the invasion of Ukraine on Feb. 24, trading in depository receipts of Russian companies has been frozen by foreign bourses. International sanctions have targeted tycoons, banks and even the country’s foreign reserves, while turning the nation’s listed companies into penny stocks in a matter of days.

According to the amendments signed by Putin, trading in depositary receipts on foreign exchanges must stop 10 days after the bill is published. At the same time, the laws allows for special carve-outs if companies request permission to continue trading.

Lisin’s NLMK said on Tuesday that it planned to file for a government permit to keep its GDRs listed in London, while oil company Tatneft said it was weighing its options, “including whether to apply for such permission,” according to a filing.

Under the amended law, foreign holders of the canceled depository receipts would receive ordinary shares that are placed on nonresident accounts in Russia. Since the invasion, capital controls ban foreigners from selling Russian securities, making it impossible for now to sell the ordinary stock and repatriate the proceeds.

Even before the bill comes into force, JPMorgan & Chase had begun to allow holders of depositary receipts in Russian companies to cancel them, Reuters reported, citing two unidentified people familiar with the matter. Citigroup has opened books to cancel GDRs for En+ Group, which counts billionaire Oleg Deripaska as its largest shareholder, according to a company filing.

“The rights of shareholders who believe in Russia and have invested in the Russian market for many years and who cannot hold Russian shares directly, are being hurt,” Lisin said in interview with Kommersant this month, commenting on the law. “They have nothing to do with politics, and there is a risk that their property rights will simply be lost.”


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