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MTS to cancel US share listing following Russia’s war on Ukraine

Viacheslav Nikolaev MTS.jpg

Russian operator MTS is to cancel its share listing on the New York Stock Exchange (NYSE), where the shares have been frozen since Russia began its war against Ukraine.

MTS, the largest mobile operator in Russia, does not mention the Ukraine war in its announcement, but simply mentions a newly introduced Russian law.

However the impact of that is that MTS has to cancel its American Depositary Receipts (ADR) programme, which allows foreign shares to be traded in the US.

Russia’s Commission on Monitoring Foreign Investment says that MTS’s ADRs can continue to be traded until 12 July but warns they will be cancelled from 13 July.

The biggest shareholder in MTS is Russian industrial group Sistema, which has an effective stake of 49.94%. Sistema itself is controlled by its founder, Vladimir Yevtushenkov, who was sanctioned after Russia began its war on Ukraine. He transferred a 10% stake to his son, Felix Yevtushenkov, already a member of Sistema’s board of directors and a senior managing partner.

The NYSE and Nasdaq stopped trading in MTS and other Russian shares shortly after Russia invaded Ukraine in late February. The price of MTS shares halted at US$5.50 at that point, having been $8.11 only weeks before. They are still stuck at $5.50, where they were when trading halted.

MTS has not explained how US owners of ADRs will be able to get their money back. The company says it will “place additional information on the mechanics of ADR cancellation on the MTS Investor Relations website in the near term”.

More details may emerge at MTS’s annual shareholder meeting on 22 June.

A month after the invasion, MTS reported that its CEO, Viacheslav Nikolaev (pictured) had acquired 19,983,816 ordinary shares in the company. Nikolaev became president and CEO in March 2021, succeeding Alexey Kornya, who moved on to a role in Sistema.

The decision to cancel the ADRs confounds many US share tippers who were recommending MTS as a good stock for investors early this year. Gio Danisi, writing on Seeking Alpha on 26 January, wrote that shares were “too cheap to ignore, adding: “Recent unrest on Ukraine’s borders has brought down Russian companies.”

But, he added that MTS “is a solid company insulated from major geopolitical risks, so it offers a compelling opportunity”. Danisi said: “If investors have the courage to put up with some short-term problems, the long-term rewards could be great.”

Simply Wall St, writing for Yahoo Finance, said MTS “is still a bargain right now according to my price multiple model, which compares the company’s price-to-earnings ratio to the industry average”.

A Russian law that came into force in April required Russian companies to terminate their depositary receipt programs unless granted an exemption by the Commission on Monitoring Foreign Investment. MTS negotiated an extension, but only until 13 July.

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