Specifi cs of IPO valuation in Russia’s “new reality” (since 2022)

Since 2022, against the unprecedented international sanctions pressure, the Russian equity capital market has changed significantly the demand for new IPO transactions has become represented exclusively by domestic investors (the so-called “new reality”). At the same time, the initial public offering of shares on the stock exchange has become more accessible for Russian issuers and has gained even greater popularity among retail investors who have become a new driving force in the stock market. Moreover, the relevance of studying the IPO valuation process transactions in Russia is confirmed by recent government initiatives to stimulate the Russian IPO market, as well as plans to privatize a number of state-owned enterprises through initial public offerings. Thus, the purpose of the study is to identify the key features of the valuation process of IPO transactions of the “new reality” (since 2022). The methodological basis of the study is represented by the analysis of relevant international and domestic scientific publications, resulting in the analysis of the application features for various equity valuation methods on developed and developing stock markets, as well as a qualitative and quantitative study of IPO transactions of the “new reality” based on information on the feedback of key institutional investors and reports of underwriters’ research teams. In the article, the author offers the interpretation of the “fair value” definition (as a result of a multi-level company’s analysis, combining qualitative and quantitative approaches, since it sets valuations expectations for both the issuer and investors) and the application methodology for the “IPO discount”. Finally, the author provides recommendations on qualitative characteristics for reducing the IPO discount, which can be useful for new issuers planning an IPO, as well as for the scientific community studying the problems of the Russian equity capital market.

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