Motor Sich stock banned from trading, headquarters searched

The Ukrainian Exchange (UX) announced on Apr. 23 it
halted that day trading of the shares of aeronautics giant Motor Sich (MSICH
UK), citing a local court ruling that bans any operations with its shares. The
Apr. 20 court ruling is not available on the Internet, so far.

The same day, the Security Service of Ukraine (SBU)
reported it conducted searches of Motor Sich headquarters in Zaporizhia and
premises belonging to certain officers “to obtain additional evidence in
criminal proceedings.” Namely, the SBU is investigating possible
“sabotage,” referring to the alleged sale of a controlling stake in Motor
Sich to non-residents, as well as an initiated project to build an aeronautics
engine plant abroad with the intention to move production and technologies
there.

Recall, in September 2017, the SBU initiated an investigation
of the sale of 56% of Motor Sich shares to a group of investors related to the
Chinese company Beijing Skyrizon Aviation Industry Investment. As part of that
investigation, a Ukrainian court froze 41% of the shares in Motor Sich.

Alexander Paraschiy: Motor Sich
is among the most actively traded stocks on the Ukrainian market so the trading
ban will harm the market’s liquidity significantly. Regarding the sabotage
allegations, it’s hard for us to find a crime against the state in a simple
attempt of an owner of a private company to sell his shares to another private
individual(s). The SBU might be basing its investigation on the “strategic
importance” of Motor Sich as a producer of engines for military helicopters and
planes (and not only) that previously had the Russian military as a key client.
If the company is so important for Ukraine’s defenses, the state should be
considering acquiring the company, especially amid the Russian military
aggression. In light of this, the investigations might be part of a campaign to
pressure the company’s 79-year-old CEO Vyacheslav Boguslayev (Motor Sich top
manager since 1988 and its likely beneficiary owner) to surrender his control
to well-connected individuals. Otherwise, this has the signs of a banal
Ukrainian raid by state officials on private property under a political
pretext.