VTB Group, Russia’s second-largest bank, suffered its worst losing streak in three months after saying it would cap a share buyback for investors that lost money in its 2007 initial public offering.
Shares of state-controlled VTB sank 1.9 percent to 6.77 kopeks by the close of trading on Moscow’s Micex index. The fifth day of declines capped the stock’s longest losing streak since November.
VTB surged as much as 4.3 percent on Feb. 2 after Prime Minister Vladimir Putin told the Moscow-based lender to consider buying back shares from investors who participated in the bank’s 2007 IPO. The buyback will be capped at 500,000 rubles ($16,600) per person at the 2007 IPO price of 13.6 kopeks, VTB Chief Executive Officer Andrey Kostin said at a briefing in Moscow yesterday.
“The initial news of the buyback sparked some hype but all the speculative money swept out when the details became known,” Michael Kart, a managing partner at hedge fund firm Spectrum Partners Ltd., said by phone. “As of today, investors are building short positions in the name.”
Spectrum currently holds the stock and did not take part in the IPO, according to Kart.
Kostin said the courts probably wouldn’t rule in favor of investors excluded from the buyback.
“Legal action by investors is possible,” Ivan Mazalov, director of Prosperity Capital Management, which manages about $4 billion in assets in Russia and former Soviet states, said by phone today. “It’s a risk when a company buys back shares well above the market price from only a certain number of investors.”
Prosperity did not participate in the IPO, Mazalov said.