OAO MegaFon (MFON), the Russian wireless carrier planning an initial public offering, postponed its IPO marketing campaign the day it was supposed to begin, raising investor speculation that demand may have trailed expectations.
Potential investors had prepared to attend a MegaFon event in Moscow today, only to learn this morning that it had been canceled, said Yuri Morogov, a portfolio manager at Troika Asset Management in the city. MegaFon said in a filing today it will proceed with marketing “at a later date,” after including recent acquisitions and third-quarter results in the prospectus.
The delay signals demand hasn’t been as strong as MegaFon expected, said Alexander Golovtsov, who helps manage $2.8 billion at UralSib Asset Management in Moscow. MegaFon is seeking to sell as much as 20 percent of its stock, including shares owned by Sweden’s TeliaSonera AB (TLSN) and some from the carrier itself, in an IPO that may become one of the largest by a Russian company.
“I think MegaFon named ’amending prospectus’ just as an excuse for postponing the IPO,” Golovtsov said. “The real reason may be insignificant demand, which implied a more than 10 percent discount to OAO Mobile TeleSystems (MTSS),” he said, referring to MegaFon’s larger competitor.
In its filing today, MegaFon said “investor engagement in the investor education process has been exceptionally strong.”
“MegaFon management was scheduled to meet investment funds at 1 p.m. in Moscow today starting the roadshow,” said Morogov of Troika, which manages $2.6 billion of assets. “I came to the office and learned it’d been canceled.”
The carrier is determined to complete the IPO before year- end, with the delay postponing the planned sale by a few weeks, according to two people familiar with the matter. The shares may start trading in late November or December, they said.
MegaFon, based in Moscow, agreed to buy 25 percent of Russian handset retailer Euroset this month and secured an option to buy another 25 percent from billionaire Alisher Usmanov as soon as one year from now. The combined 50 percent stake is valued at $1.33 billion, the company said. Usmanov controls MegaFon.
The banks managing MegaFon’s IPO valued the company at $12 billion to $16 billion, while investors see value at up to $11 billion, people familiar with the matter said last week.
Morgan Stanley (MS:US) and Russia’s OAO Sberbank CIB (SBER) are managing MegaFon’s share sale, with help from Credit Suisse Group AG (CSGN), Citigroup Inc. (C:US) and VTB Capital (VTBR), the company said.
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