Investor caution towards MegaFon, controlled by Russia's richest man Alisher Usmanov, in part reflects the patchy performance of Russian new issues. MegaFon has also struggled to differentiate itself from leader MTS, which has a bigger free float, a similar dividend yield and a long track record as a public company. "MegaFon is five years late with its IPO (initial public offering) as the phase of active growth of the Russian telecoms market is already over," said Yevgeny Golosnoy, analyst at brokerage Metropol. "Global investors ... need either a very low price or growth potential."
MegaFon's IPO at $20 per GDR - the bottom of a range between $20 and $25 it had previously set - valued the company at $11.1 billion and is the biggest listing by a Russian company since aluminium producer RUSAL floated in Hong Kong in 2010. Leaving the London Stock Exchange after a ceremony to mark the start of trading, MegaFon Chief Executive Ivan Tavrin high-fived a colleague and appeared elated. Following a series of Russian IPOs which have fallen below their issue price, Megafon shares traded at $19.46 in London at 1500 GMT, 2.7 percent below the issue price. The deal was covered 1.3 times, one market source said, but it had been a struggle to fill the book, said another. MegaFon is focused on Russia and is outpacing its peers in a maturing, though still lucrative, mobile market. Still, some analysts have said the IPO would only be interesting if priced at a clear discount to MTS.