CTC Widens Stock Drop as Broadcaster Is Removed From Russia ETF

  • Shares decline in New York to extend loss this year to 66%
  • Change in Russia's media law lowers foreign ownership cap

CTC Media Inc., the television broadcaster that’s facing tighter regulation of foreign ownership in media companies, deepened its plunge after the biggest exchange-traded fund tracking Russian stocks excluded the company from its holdings.

The shares, which lost 65 percent in 2014, have slid another 66 percent this year, twice as much as the second-biggest decliner in a Bloomberg index of the most-traded Russian stocks on U.S. exchanges. The stock fell 1.8 percent to $1.67 on Monday in New York after retreating more than 6 percent earlier in the day to a record low.

The jettisoning of CTC Media from the Market Vectors Russia ETF is the latest setback for the company that is about 39 percent owned by Stockholm-based Modern Times Group AB. Russia passed a law last year that lowers the threshold for foreign ownership in media outlets to 20 percent from 50 percent. Sentiment on CTC Media, which gets most of its revenue from advertising, has soured further as the nation is in the midst of its first recession since 2009.

“There aren’t any positive developments for CTC Media as of now and nothing to be optimistic about,” Sergey Vasin, an analyst at Gazprombank JSC, said on Monday. “There is a lot of uncertainty about the form the company will take, there is a lot of uncertainty in the broader economy, and when one is added to the other, investors become nervous.”

CTC Media Stock Price
CTC Media Stock Price

Fund Expulsion

CTC Media will be removed from the index of the largest and most liquid Russian companies tracked by the Market Vectors Russia ETF after the market closes on Sept. 18, Van Eck Securities Corp., which distributes the fund, said on Monday. Changes will be effective on Sept. 21, Van Eck’s Bettina Hessler said by e-mail. Igor Ivanov, a spokesman for CTC Media, declined to comment.

President Vladimir Putin in mid-October signed legislation lowering the threshold for foreign ownership from 50 percent. The tighter restrictions come as Putin tries to strengthen control of communications in the country amid what some in his government have called an “information war” with the U.S. and its allies.

CTC Media, which was listed on the Nasdaq Stock Exchange in 2006, is the only publicly traded Russian television company. Billionaire Alisher Usmanov offered $200 million for 75 percent of the company’s Russian and Kazakhstan business operations. Usmanov is bidding for the CTC Media business through UTH Russia.

On a scale from 1 to 5, CTC Media has a consensus recommendation of 2.8, the second-lowest among its global peers. Buy recommendations on the stock dropped to 2, the lowest number since 2007, data compiled by Bloomberg show. The stock trades at 5.2 times projected earnings, the cheapest in the group. Its relative strength index hovers around 37, near the level of 30 that some technical analysts see as a signal that it’s poised to rally.

Economic Decline

The Market Vectors Russia ETF added 1.3 percent to $16 on Monday. The Bloomberg Russia-U.S. Equity index rose 0.1 percent to 49.34. Futures on the RTS Index expiring on Sept. 15 were little changed. The ruble gained 0.6 percent to 67.4490 against the dollar. Moscow-based United Co. Rusal rose 1.1 percent to HK$3.54 at 10:39 a.m. in Hong Kong, heading for the highest close since Aug. 18.

Russia’s gross domestic product shrank in each of the past two quarters and is forecast to contract 3.7 percent this year, according to the median estimate of 41 economists surveyed by Bloomberg. Spending on advertising in Russia will shrink 14 percent this year, analytics agency ZenithOptimedia said in a report on Monday.

“The exclusion of CTC Media from the Market Vectors ETF means for some investors who own the stock that they have nothing to do but sell,” Konstantin Belov, an analyst at UralSib Capital in Moscow, said by phone on Monday. “This adds to the general pessimistic sentiment around CTC Media.”

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