Investors who scrambled to buy shares in Evraz (EVZ) when its share price plummetted by around 90 per cent are now likely facing a long wait - at best - for trading to be restarted. The shares were suspended from trading on 10 March, shortly after the UK government hit Roman Abramovich, who owned 29 per cent of the steelmaker, with a raft of sanctions.
The Financial Conduct Authority (FCA) instructed the suspension “in order to protect investors pending clarification of the impact”, a spokesperson said. The government's sanction statement said Abramovich had “effective control” of Evraz which has been engaging in activities “which include potentially supplying steel to the Russian military which may have been used in the production of tanks”.
Evraz denied government claims that it had potentially supplied steel to the Russian military, saying that it supplied long steel to infrastructure and the construction sectors only. It also rejected claims that Abramovich had effective control of the company.
The question for investors now is how long they will have to wait until the suspension is lifted. All of the non-executive directors of Evraz have now quit, and a number of City and politics grandees - including the former Conservative leader Sir Iain Duncan Smith - are calling for the shares to be removed from the London Stock Exchange.
If this happens, shareholders would then own a stake in a private company and could only trade them on a match bargain basis, explained Neil Wilson, Markets.com analyst, adding that the company could set up informal facilities for share redemption. Matched bargain trading is used for extremely illiquid shares. Another option could be to list the shares on the Moscow Stock Exchange when it re-opens. “I would think it would be tricky to get money out either way,” Wilson said.
Rob Morgan, chief analyst at Charles Stanley says even if the shares did list in Moscow, Charles Stanley Direct “can’t hold Russian shares because we have no Russian custody account and we can’t trade on Russian markets,” adding “I suspect that the same limitations will be in place across much or all of the industry”.
But there is a lot of uncertainty about what listing in Moscow might mean for the rights of overseas investors, not to mention the value of the shares. But it's not the only option: “A stock exchange in the far east could be an alternative venue for a potential relisting which might offer greater liquidity and protection for investors", said Laith Khalaf, head of investment analysis at AJ Bell. "But seeing as around half the company is owned by two Russian oligarchs, I suspect that they will ultimately call the shots,” he added.
Lee Wild, head of equity strategy at interactive investor, also thinks the suspension is likely to last as long as sanctions are in place. “If and when trading in the stock resumes, one would assume the Russian economy will be functioning more normally again and that Evraz itself will be free to trade with the West," he said.
“Given the suspension price factored in a lot of bad news, it is possible that the shares will appreciate in value when they begin trading again, but only as long as the underlying business remains intact,” he added.
In the meantime, Russian companies still trading are facing more pressure from institutions: FTSE Russell has booted Polymetal (POLY), Petropavlovsk (POG) and Raven Property (RAV) from all indices. Polymetal and Evraz had already fallen out of the FTSE 100 but this will see them removed from the smaller market capitalisation groupings as well.
