>> Kazakhstan has talked up the IPOs of several large state-owned companies this year but, James Kilner asks, where are they?

Was that the sound of the starting gun or was it another decoy on Kazakhstan’s journey to selling off 25% stakes in a handful of its most senior companies?

I’m talking about, of course, news this week that Kazatomprom, Kazakhstan nuclear agency, plans to list GDRs in London.

GDRs, or to use their full title — Global Depository Receipts, are a financial instrument that allows companies to sell share certificates, issued by depositary banks, to professional and institutional investors. Issuing GDRs, rather than selling off shares, is, to some degree, a more limited version of a full IPO. Access to the stock is controlled; the market is ring-fenced.

Much of the reporting of Kazatomprom’s announcement that it intended to sell off GDRs on the London Stock Exchange was excitable, exclaiming that the ‘People’s IPO’ in Kazakhstan was finally happening. But is it? Yes, selling GDRs in London will dilute the state’s ownership of Kazatomprom but this is still a long way from an IPO on an international exchange. In January this year, Kazmunaigas, the Kazakh state energy company, said that it was buying back its GDRs in London so that it could prepare for a full listing.

Does this then mean that Kazatomprom has ditched the idea of a full IPO? Where does this leave other Kazakh companies contemplating IPOs, among them Air Astana which is part-owned by BAE Systems? And what of the Astana International Finance Centre (AIFC) – President Nursultan Nazarbayev’s Great White Hope on the Kazakh steppe? Since it was officially launched in July at the site of the former EXPO in Astana, the news flow has gone quiet. It was supposed to carry an equivalent 25% Kazakh listing to match any international listing.

But despite the fanfare and the general upbeat notices from Kazakh officials, the anticipated IPOs have failed to materialise this year. Kazatomprom talked up a listing on the AIFC at the same time that it lists its GDRs sell in London but the details have yet to be released.

There is still time, of course, but Kazakhstan and its companies need to shift up a gear if they are going to hit the expectations that they have drummed up. The IPO market has weakened over the year, possibly delaying Kazakhstan’s IPO plans, but Kazatomprom’s GDR listing is not enough to give ordinary investors a decent buy-in into Kazakhstan and Kazakh companies.

ENDS

>>This story was first published in issue 388 of The Conway Bulletin on Oct. 17 2018