PFTS Halts Trading in Zaporizhstal

The PFTS’s supervisory board yesterday stopped trading in Zaporizhstal (ZPST: Suspended) after receiving complaints from minority shareholders. The move came after Zaporizhstal decided at its June 7 AGM to merge with several trading companies through a swap of shares. Minority shareholders contend that the valuations of the trading companies, the valuation of Zaporizhstal shares (at par value rather than market value) and the closed nature of the placement have the effect of diluting their shares without compensation. The dispute is currently in court. The PFTS board also decided to consider the issue again on July 10, after a planned Zaporizhstal supervisory board meeting where the company’s management are expected to approve an offer to buy out minority shareholders. Zaporizhstal’s main shareholders have informally offered to buy out minorities at the current market price, while minorities are asking for the market price that prevailed before the share issue was announced. Andriy Gostik: This is positive news as it puts pressure on Zaporizhstal’s main shareholders to strike a compromise with minority shareholders. If that happens, we expect trading in ZPST will resume after the PFTS’s July 10 meeting. If not, PFTS could take additional measures up to delisting the stock. Since ZPST’s parent group is planning a listing on a foreign stock exchange, we think it is in their interests to compromise with minorities. However, the outcome is still unpredictable. Owners of Ukrainian companies historically have not had high regard for local stock market regulators.