High IPO preparation costs and limited demand from long-term investors make it difficult for Russian companies to raise capital. Antonina Levashenko, Head of the Gaidar Institute's International Best Practices Analysis Department, spoke to Nezavisimaya Gazeta how to improve the situation, taking into account international experience.
According to Antonina Levashenko, the number of companies listed on the exchange does not always reflect the actual size of the stock market. According to OECD data for 2023, China had 1.5 times more listed companies than the US, yet the capitalization of the main stock markets relative to GDP was 3.6 times lower. This demonstrates that for market development, it is not just new issuers that matter, but also the volume of investment they can raise.
In Russia, the costs and complexity of IPO (initial public offering) preparing remain a barrier to companies going public. Additional requirements can hinder access to the stock market for small and regional companies. According to Antonina Levashenko, these barriers can be reduced by expanding IPO cost reimbursement programs and simplifying certain requirements for promising companies, including those in the technology sector.
“We need to stimulate not only the supply of shares, but also, first and foremost, long-term demand for them by creating more favorable conditions for investors and attracting institutional investors: pension funds and insurance companies,” the expert emphasized.
Such market participants are able to make considerable long-term investments. However, they may avoid investing in smaller companies due to the increased risks. So, it is important to create conditions that allow professional investors to more actively finance promising businesses. As an example, Antonina Levashenko cited South Korea, where in 2024 a system for long-term asset allocation for individual pension funds was introduced, allowing them to invest in private, growing companies.
Another area is to adapt the requirements for entering the stock exchange, taking into account the stage of business development. Some countries have special conditions for certain categories of companies. For example, the South Korean KONEX exchange has no mandatory profitability requirement, while the Chinese STAR and ChiNext exchanges allow even unprofitable companies to list, provided they meet certain conditions.
At the same time, easing of requirements should not weaken investor protection. The goal of regulation is to make the stock market more accessible to promising companies, with transparency and investment security upheld.