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Rusal’s float goes sour as shares plunge

City A.M. Reporter
Shares in Rusal tumbled nearly seven per cent yesterday, meaning the world’s largest aluminium producer has shed more than a third of its initial public offering (IPO) price in a month.

Ever-present uncertainties surrounding the group’s chief executive and major shareholder Oleg Deripaska which caused retail investors to be banned from the original float are among the reasons for the slide, traders and fund managers said.

The fall has come despite the price of aluminium rising by around $100 (£64) a tonne since 5 February to trade around $2,100 a tonne.

Rusal floated around 10 per cent of its stock amid great fanfare in late January -- raising $2.2bn to pay down debt while becoming the first ever non-Asian firm to list in Hong Kong.

“Most of the fund managers don’t like the stock... The gearing ratio is very high. There’s a lot of uncertainty about the aluminium business in Russia,” said one Hong Kong dealer, on condition of anonymity.

Alfred Chan, chief dealer at Cheer Pearl Investments, said some funds were obviously keen to get rid of the stock.

“There’s a sell-off by a big fund. They’ve been waiting so long to unload it and there’s been no turnaround in the business. The turnover is very heavy. Whoever’s selling it is a big boy, there are no small investors involved in this stock,” he said.

The Russian company’s shares tumbled nine per cent on their debut as previously favourable market conditions suddenly crumbled – and the latest fall sees the stock some 30 per cent below the HK $10.8 (89p) flotation price at HK $7.4.

Rusal’s IPO, which had been expected to spark a stampede by Russian firms to list in Hong Kong, was backed by New York hedge fund guru John Paulson, Hong Kong’s richest man Li Ka-shing and blue-blooded financier Nathaniel Rothschild – all now sitting on heavy losses.