Russian opposition media unite to go public

Pussy Riot punk band members Maria Alyokhina (L)and Nadezhda Tolokonnikova, freed from prison under an amnesty, give a press conference on Dozhd [Rain] TV channel. They were sentenced to two-year prison terms in July 2012 for offensive performance inside the Christ the Saviour Cathedral in February 2012. Source: Sergei Bobylev

Pussy Riot punk band members Maria Alyokhina (L)and Nadezhda Tolokonnikova, freed from prison under an amnesty, give a press conference on Dozhd [Rain] TV channel. They were sentenced to two-year prison terms in July 2012 for offensive performance inside the Christ the Saviour Cathedral in February 2012. Source: Sergei Bobylev

Independent news organizations including oppositional television channel Dozhd TV and the Slon and Bolshoi Gorod media outlets are to be brought into one media group and floated on the Moscow stock market. The IPO will be the first by a Russian media holding since 2006.

Former investment banker and owner of Russia’s main oppositional television channel Alexander Vinokurov has united his various independent news organizations into one media group and is putting it on the Moscow stock market. This will mark the first Russian media holding to have an IPO since 2006. 

The media holding includes Alexander Vinokurov’s TV channel Dozhd (“Rain”), the magazine Bolshoi Gorod, and the online edition of the Slon media outlet, all of which are known for espousing oppositional points of view. In light of the serious financial difficulties these publications have been experiencing lately, the investor has decided to hold an IPO with a view to alleviating those worries. The holding’s management plans to spend the proceeds on a new studio complex for Dozhd TV. The value of the IPO remains unknown, though as Vinokurov said on Dozhd, the amount could be anywhere from 300 to 700 million rubles ($8.7-$20.4 million).

A justifiable strategy

"This idea sounds very interesting and even quite logical. Despite the small scale of the business, for companies with similar profiles, going public has proven to be a justifiable strategy,” says Maxim Klyagin, an analyst at Finam Management. According to Klyagin, the alternatives - to obtain loans from issuers in second-and third-tier echelons, those that work in the technological and intellectual spheres - are currently limited. In such circumstances, an IPO as a tool to attract external resources can be one of the most effective solutions, he said.

In total, the holding’s revenue in 2013 was slightly more than 530 million rubles ($15.4 million), with the TV channel generating nearly 70 percent of that total. "Taking into account the more than 50 percent growth in monthly television audience according to the 2013 results, the asset does look attractive for an IPO,” says Timur Nigmatullin, an analyst at Investcafe.

Which bank will carry out the IPO is still unknown. However, Vinokurov has not ruled out participating himself in the preparations for the IPO. In 2001, he created one of the largest investment banks in Russia, KIT Finance. In 2008, Forbes magazine estimated Vinokurov’s total fortune at $1.3 billion. However, during the crisis of 2008-2009, he lost most of his assets, and his bank was sanitized by the state. Following this, Vinokurov decided to move into the media business, and in 2009, he invested in the creation of the Dozhd TV channel.

Previous experience

As far as IPOs for Russian media holdings on the Moscow stock exchange go, Vitaly Tsvetkov, head of the information analysis department of the audit and consulting group Gradient Alpha, can recall only the media holding RBC, which went public over a decade ago in 2002. During that IPO, a package was presented that was 16 percent of the company’s share capital, and as a result of going public, the company attracted $13 million. A year and a half later, after its first public offering on the stock exchange, RBC’s stock price doubled.

Another large Russian media company had its IPO in the United States on the NASDAQ stock exchange. In June 2006, CTC Media, which united several Russian TV channels, held its IPO, putting up 16.38 percent of shares at $14 apiece. During that IPO, the company’s shareholders earned about $350 million.

In 2010, one of the largest media holdings in Russia, Profmedia, held its IPO on the London Stock Exchange. The holding, which includes several well-known magazines and online publications, planned to offer investors up to 40 percent of its shares. Given the fact that the banks assessed the entire business at $2-$2.5 billion, the IPO could have reached a record $1 billion. However, due to instability on the financial markets, the holding decided to abandon the IPO. Subsequently, in 2013, its main shareholder, Vladimir Potanin, the owner of the largest nickel company in the world, Norilsk Nickel, sold Profmedia to Gazprom-Media (a subsidiary of the oil and gas giant Gazprom) for $602 million.

As it stands, no Russian media holding has put its shares on the stock exchange since 2006. Vinokurov's decision to move forward with the IPO could change that trend. According to Nigmatullin, the IPO for Vinokurov’s opposition media holding company is unlikely to happen in 2014. "The fact is that these particular media projects are characterized by high political risk,” warns the expert.

In January 2014, Vinokurov’s primary media asset, Dozhd TV, fell into financial difficulties after the channel submitted a live poll to its audience asking the question “Would it have been better to surrender to the German troops during World War II in Leningrad (present-day St. Petersburg) if, as a result, the 900-day siege, marked by starvation that killed more than 600,000 citizens, could have been prevented?” Many public organizations, politicians, and ordinary viewers found the question to be offensive. After the survey, the largest cable operators expelled Dozhd TV from their service packages, and the channel’s audience plummeted by 80 percent. The channel’s leadership viewed the actions of the channel operators as signs of political pressure against its oppositional political positions.

In June 2014, at a press conference after the ceremonies in Normandy, Russian President Vladimir Putin separately responded to a question about the fate of Dozhd TV, saying he did not give anyone instructions to stop broadcasting it. "I have never given a command to stop working with any cable channels, and I do not feel entitled to begin offering such guidance now," said the head of the Russian state in response to a reporter's question on the TV channel.

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