Ferrexpo Announces Offering Price Valuing It at USD 1.67 bln

This morning Ferrexpo Plc (FXPO LN) announced the offering price of 140 pence per share, implying an MCap of USD 1.671 bln at placement. Vladimir Nesterenko:  The recent court ruling challenging the legality of Ferrexpo’s purchase of a 40.2% stake in its core underlying asset, Poltava Iron Ore (PGOK: U/R), did not depress investor’s attitudes much as the offering price is skewed toward the upper bound of the USD 1.4-1.8 bln valuation range mentioned in the earlier news. More importantly, the offering price implies that Poltava Iron Ore currently trades at a 9% discount to Ferrexpo. Given that the IPO most probably targets transferring value off-shore while keeping major risks locally, Poltava Iron Ore is likely to remain a non-transparent company, serving as a cost center for the group. The IPO is also likely to challenge the liquidity of the competing local stock (PGOK). We believe Poltava Iron Ore deserves a much larger discount and take a bearish view on the stock; however there might still be room for a short-term appreciation on the back of speculative demand.