— Kyivstar announced the first IPO of a Ukrainian company after a long break. True, we are talking about the American Nasdaq. I asked Kyivstar CEO Oleksandr Komarov about the possibility of a dual listing, because investors in Ukraine would probably also be interested in this company, but I haven’t received an answer yet.
As I understand it, they want to put all 100% of Kyivstar’s shares into an SPV (Special Purpose Vehicle) account and trade on Nasdaq. That is, these securities will not be traded in Ukraine.
I would prefer that they implement a different approach, because otherwise there will be a dual listing. The ideal picture of the world, in my opinion, is if Kyivstar withdrew part of its shares from Ukrainian jurisdiction, they would be traded on Nasdaq, but the rest would remain in Ukraine and be traded here. This will create conditions for arbitrage, that is, market makers will be able to earn on the difference in the value of Kyivstar shares on Nasdaq and in Ukraine, bringing this difference closer to zero. This approach is very important, and I insist on it in discussions with some of our managers who propose to issue securities of Ukrainian enterprises immediately on foreign platforms. This is not right. If our company goes to Nasdaq, WSE (Warsaw Stock Exchange), LSE (London Stock Exchange), etc. – we are sponsoring foreign infrastructure. That is, the business is here, but all the money is there. And there will be no double listing.
But if you leave the shares here, start trading here, but make a “link” so that they freely enter foreign markets and return back – this will be the beginning of the development of the domestic stock market. Then everyone who is interested in investing in this company will buy here. If they want, let them withdraw securities through this “link” to their accounts in depository institutions in Europe, in America – elsewhere. But in this way they allow Ukrainian exchanges, depository institutions, investment firms to work.
— So you believe that we still have a chance to repeat the path of, if not the Warsaw, then, conditionally, the Bucharest Stock Exchange?
It seems to me that yes, but there is not enough money for this investment to take place, there is not enough business from trading domestic securities. I am sincerely happy for PFTS, which managed to fulfill the prudential liquidity standard and for now remove the issue of revoking the exchange license. But if they do not come up with some instrument or product on which the exchange’s clients, investment firms, will earn, then there is a risk that they will run out of money again. I want PFTS to use this impetus for something sensible.
For my part, I see that the best thing we can do to help the market is Bill No. 8111 on investment accounts, because it will bring “long money” to the real sector of the country’s economy. Because currently, the taxation of investments by individuals is 23% (18% personal income tax + 5% military levy). Instead, the idea of the law is that an individual transfers money to an investment account and invests in instruments from the permitted list. If an individual does not withdraw funds from this investment account for 3-5 years, he or she will receive a partial or full tax exemption on these funds.
In addition to investment accounts, the source of “long money” in the real sector of the economy should be the funded pension system. A vivid example is Poland, where the lion’s share of the economy was financed by the funds of Polish pensioners.
— I did not want to touch on this topic, because, firstly, it is very large, Secondly, I do not believe that such a reform can be launched during a war, especially taking into account the position of donors.
Yes, but we need to talk about the topic of funded pensions. The solidarity system cannot stand it, we need to reduce the burden on the budget. How to reduce it? The idea of the funded system is that deductions in the form of the Social Security Fund are reduced and at the same time the budget’s obligations to pensioners are reduced. And the money not received in the form of the Social Security Fund is transferred to the funded system, in order to then pay pensions to its participants. But where will we invest the money from this funded system – again in the budget in the form of government bonds? This will create an even greater burden on the budget, because we need to pay interest. Therefore, we need to create additional reliable instruments for investing pension money that would not create competition with the Ministry of Finance’s borrowing.
Such instruments could be shares of profitable state-owned companies that will pay dividends. One of such companies, as we already talked about in the first part of the interview[1], could be Ukrposhta. And that’s how it will start working.
I am absolutely sure that without a stock market we will not ensure proper reconstruction of the country’s economy. Direct investments, selling mining licenses, we will not achieve the necessary result. Investors will not always invest such large sums. Therefore, it is necessary to provide portfolio investment instruments that are understandable to European and global investors (shares and other corporate securities).
I repeat once again, if we make the “link” correctly, then Ukrainian securities can be easily withdrawn through Euroclear, Clearstream or other de
positions on foreign markets. Foreign investors will be able to buy them without opening accounts with us. And our market participants will earn on this, because it is cheaper for a foreigner than opening accounts in Ukraine.
— Is there already a plan when this should be done?
This year, such a “link” should be.
— Like what the National Bank did last year for government securities?
I want to do this for all securities. In fact, there is already a “link” between the NDU and the Polish central depository KDPW. That is, Ukrainian securities can be withdrawn to Poland.
— In the first part of the interview, we talked about the prospects for a possible revival of the Ukrainian market through IPO and SPO. But it is difficult to imagine it given the current state of investor protection. When and how will the story with the clients of Freedom Finance Ukraine LLC, who have been suffering from the imposition of sanctions on this professional participant for the third year, end?
First, I would like to emphasize that the recent amendments by the President to the 2022 decree on the imposition of sanctions in accordance with the NSDC decision confirm that the Commission has been right about this case all these years. We were manipulatively accused of inaction, but the decree confirms that we were right – we simply did not have the necessary powers.
Now, after the amendments were made, a mechanism has appeared that we are working on together with both depositories, the bank and the relevant law enforcement agencies. We have already published the Commission’s decision for review so that everyone understands how this will happen.
— In what terms, at least approximately, will the first clients of “Freedom” be able to receive their money or securities?
We are already in dialogue with them, Commission member Yaroslav Shlyakhov communicates once every two weeks so that there is no speculation and manipulation. When investors understand how the process is moving, it is easier to wait. According to my subjective feelings, the calculations will begin in the summer and will continue very quickly. If it starts earlier, it will be a pleasant surprise.
The main thing here is not to violate the sanctions policy of the state. I understand that people are waiting, and we are definitely on the side of investors, so that they can return the assets as soon as possible. At the same time, we will not allow anyone related to the sanctioned owners to receive the assets. And such an inspection is not within our competence: we need to be given the “ok” by our colleagues in state regulation and law enforcement agencies.
— The commission appointed a temporary manager of “Freedom” back in the summer. Did he conduct an audit? What is the current state of these frozen client assets and how reliably are they protected?
He conducted an audit, there is a report. The assets are there, there is enough money. The management that was there treated this conscientiously. So there should be no problems with payments.
— Colleagues from “Economic Truth” wrote that other unlicensed activities are being conducted on the basis of “Freedom”.
Anyone can create anything, but nothing can be moved. The accounts are blocked for everything. We haven’t even been able to enter information about the manager into the Unified State Register (USR) for six months. Therefore, any other activity is impossible.
— What is the guarantee that tomorrow similar sanctions will not be imposed against some other trade union member and his clients will also be deprived of access to their assets for several years?
I hope this will not happen again. But if something like this happens, there will already be experiences on what to do about it. That is, there is an institution of a temporary manager, methods and practices. I would like to remind you that when sanctions were imposed on Freedom in October 2022, the old law on the NSSMC was in effect, and we did not have an appropriate tool.
— In addition to Freedom, there is another important case – the transfer to the state of a share of corporate rights of private shareholders of Ukrnafta, Motor-Sich, Zaporizhtransformator. If there is a truce, the end of martial law and war, what will the Commission propose to the government to do, what to compensate investors for their assets and restore their trust?
Some of these companies are former blue chips that were not just included in the index, but were leaders with the largest shares in this index, so people hoped that the rules of the game would be followed. Maybe not the best example, but it’s like you play chess and you are beaten with a chessboard. But I’m not talking about the state, but about the management that was there. Now the state has taken the “chessboard” to itself, and as a conscientious player it must fulfill its obligations for those periods.
For example, “Ukrnafta”, where there were so-called “selective payments” of dividends – some were paid, and some were not paid. I am sure that it is the task of the current management to ensure that the obligations to pay dividends for past periods are fulfilled, and people understand that now the issuer is really starting to “play chess”.
As for the transfer of shares to the state, it is worth understanding that there is a war going on and such a transfer was necessary for victory. After the war is over, it will be necessary to analyze how much it cost, how it will be returned or compensated. It is the same as with a car when it is taken from you for the needs of the Armed Forces of Ukraine: if it is intact, it is returned to you, if not, then its fair value is compensated. This is how it should be done. And this will be a sign to all investors that the state understands what corporate governance is, the rules of the stock market, and what
investors’ rights must be restored.
— To protect investors, at the initiative of the Commission, the National Depository introduced accounting of LLC shares in its own system. But so far, the number of companies that have chosen this option is not very large. Among the reasons for low interest, rather high prices are mentioned.
I heard that some complained. But, as far as I know, the NDU has now significantly reduced the cost of this service.
In my opinion, this service should be advertised better. But I know for sure that the NDU had a surge in demand due to the recent enemy cyberattack on the Unified State Register. It showed the advantage of accounting for LLC shares in the NDU. Those who managed to switch to the NDU did not feel the consequences of this attack.
Another positive is that if recorded in the NDU, this share can be the subject of collateral for granting a loan, because the depository has restrictions in the form of blocking.
The third plus is DVP (delivery versus payment). When selling a business consolidated into an LLC, the counterparty risk is eliminated. The moment of mutual transfer of money and alienation of shares is controlled by the NDU.
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