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Thwarted ambition

28 October 2011 By Jason Bush

Polyus must wait. The Russian goldminer’s plans for a premium London listing and FTSE 100 inclusion suffered an unexpected setback after the Russian government failed to sign off on Polyus’ change of address. The delay may be politically motivated. It should remind London regulators that it is unwise to waive their rules for Russian companies.

Both the Russian government and the company have played down the delay. Still, it’s odd that Polyus’ long-planned move was not better prepared. And the regulatory setback comes not long after Polyus’ largest shareholder, billionaire Mikhail Prokhorov, staged his much-publicised attempt to enter politics, which ended in fiasco. Lately he has become an outspoken critic of Russia’s system of government.

No one should be too surprised if Prime Minister Vladimir Putin, who heads the commission that must sign off on Polyus’ listing plan, has wanted to remind Prokhorov who is boss. In itself this may be no great tragedy for Polyus: it could be more a gentle nudge than an iron-fisted clampdown. Still, it’s a further reminder for investors that strategically-sensitive companies cannot escape the unpredictable regulatory environments of the countries in which they operate.

This is not the first embarrassing setback for Polyus. Its listing plan was previously called into question by an ugly row with former Kazakh owners of KazakhGold, a subsidiary that had a pivotal role in Polyus’ convoluted legal transformation. Having accused these shareholders of massive fraud, Polyus found itself the butt of regulatory attacks in Kazakhstan. The two sides eventually compromised, but their peace deal is still subject to hiccups. Such risks won’t disappear with the registering of Polyus in the UK.

All of which lends weight to the arguments of institutional investors who worry the UK Listing Authority is being soft on Russian FTSE-hopefuls. F&C Investments recently expressed concerns that Polyus’ 13 percent free float was below the 25 percent threshold that is normal for premium listings, and criticised the practice of granting waivers to emerging market applicants. Strict listing requirements won’t guarantee against upsets caused by unpredictable politics. But at least, when rules are fully enforced, investors only have themselves to blame when they get burned.

 

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