RDIF proposes converting Transneft preferred shares into common shares, share split at 100:1 ratio
MOSCOW. July 18 (Interfax) - The Russian Direct Investment Fund (RDIF), which recently acquired a block of preferred shares in Transneft (MOEX: TRNF) as part of a consortium, is proposing to consider the possibility of converting its preferred shares into common shares.
This will increase the Russian oil pipeline monopoly's shareholder value and make the company more attractive for investors, RDIF Chief Executive Kirill Dmitriev, who has joined Transneft's new board of directors, said in an interview with Interfax.
"As an additional measure aimed at increasing Transneft's investment appeal, the RDIF believes it would make sense to consider the issue of converting the company's preferred shares into common ones," Dmitriev said.
Converting preferred shares into common shares would make it possible to significantly increase the company's shareholder value, he said.
"The broader list of corporate rights that common shares have will make it possible to increase the protection of minority shareholder rights and, consequently, will be a key factor of investment appeal for international and Russian investors," Dmitriev said.
"We believe that diversification of the investor base will make it possible to increase the market liquidity of the company's shares. In addition, conversion of preferred into common shares will provide a basis for a fair market valuation of the whole company's equity," Dmitriev said.
"The presence among minority shareholders of funds with international expertise, as well as further expansion of the investor base, in our view, will also make it possible to think about realizing the investment potential of the company through entry into international stock markets, including Asian ones. This could meet the long-term interests of the country in light of the possible privatization of the company," Dmitriev said.
He also said the RDIF is exploring the possibility of bringing new institutional investors into Transneft in the near future.
Another way to increase the company's appeal for investors would be to split shares at a ratio of 100 to one, which would lower the investment threshold for small investors, Dmitriev said.
"Many experts already believe that, with further development of planned investment approaches, the company's market capitalization could double," he said.