MTS ceases listing of its securities on the New York Stock Exchange. At the same time, its main shareholder, AFK Sistema, will be able to continue listing on the London Stock Exchange until May 2023.
MTS notifies JPMorgan of termination of ADR listing
Mobile Telesystems (MTS) announced that it had sent a letter of termination of the depository agreement to JPMorgan Chase, which is the depository bank for the company’s American Depositary Shares (ADR) program. This will happen on July 13, 2022.
In accordance with the custody agreement, JPMorgan will soon announce the termination of the MTS ADR program. MTS shares in the form of ADRs are traded on the New York Stock Exchange (NYSE), but trading in shares has been suspended since February 28, 2022. MTS shares are also listed on the Moscow Exchange.
How Russian companies leave foreign exchanges
In Russia, on April 27, 2022, amendments to the Law “On Joint Stock Companies” entered into force, according to which Russian companies must initiate actions aimed at stopping the circulation of their depositary receipts abroad.
MTS ceases listing of its securities on the New York Stock Exchange
But companies can apply to the Government Commission for the Control of Foreign Investments for permission to continue circulation of depository receipts abroad. MTS made such an appeal and received permission to continue listing its securities abroad until July 12, 2022.
Note that AFK Sistema, the main shareholder of MTS, also applied to the government commission for permission to continue listing its securities abroad. The permission was obtained for a much longer period – until May 13, 2023. MTS shares in the form of global depositary receipts (GDRs) are listed on the London Stock Exchange.
How the listing of Russian companies was suspended abroad
At the end of February 2022, after the start of Russia’s special military operation in Ukraine, foreign stock exchanges suspended the circulation of securities of Russian companies. Thus, the listing of shares of the Internet retailer Ozon, Yandex (owns the Russian Yandex), the HeadHunter recruiting service of the Qiwi payment system and the developer of mobile games Nexters were suspended on the Nasdaq American stock exchange.
On the NYSE, in addition to MTS, the listing of CYAN was suspended. The listing of AFK Sistema and the Internet holding VK was suspended on the London Stock Exchange.
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At the same time, Nasdaq continued trading in the shares of the telecommunications group Veon, created on the basis of the Russian mobile operator Vimpelcom (trademark Beeline). Also on the London Stock Exchange continued trading in shares of the Russian IT distributor Softline, whose main owner Igor Borovikov has tax residency in Portugal.
After that, the Government of Russia developed the aforementioned draft law, according to which Russian companies should stop listing their securities abroad. At the same time, many Russian companies entered foreign stock markets through their head offices registered in foreign jurisdictions. So did, in particular, Qiwi, Yandex, VK, Ozon, HeadHunter and CYAN.
But MTS and AFK Sistema entered foreign exchanges directly through their Russian legal entities, in connection with which they were forced to request permission from the government commission to continue listing. At the same time, MTS considered the possibility of leaving the NYSE back in 2019, but then it was decided to keep the listing.
“The conflict between Russia and the West, most likely, will not end soon, therefore it is better for MTS to avoid unnecessary risks and leave foreign capital markets, states the general director of the Rustelecom analytical agency. Yuri Bryukvin. “Besides, maintaining the listing requires additional expenses for auditors, reporting, etc.”
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Executive Director of the Capital Market Department of IC “Univer Capital” Artem Tuzov recalls that in 2019, the US authorities fined MTS for corruption in Uzbekistan in the amount of $850 million, and the company itself was already considering the possibility of leaving the NYSE. “While the avenues were open for gaining access to the foreign capital market, it still made sense to maintain a listing on the NYSE,” says Turov. “Now supporting a foreign listing is a surefire way to get a couple more of those fines.”