Shares in sprawling Russian holding company Sistema plummeted over 30 per cent on Wednesday after its billionaire Chairman was placed under house arrest, wiping more than $2 billion in value of the company.
Russian investigators accused Sistema’s Vladimir Yevtushenkov of money laundering late on Tuesday in connection with his company’s acquisition of up-and-coming oil producer Bashneft. The charges against Mr. Yevtushenkov, one of Russia’s richest men, raised fears of a return to the bad old days of asset grabs by the Russian state and drew comparisons to the fate of former oil tycoon Mikhail Khodorkovsky, who was jailed for a decade.
It comes at a time when investor confidence in Russia has been damaged by Western financial sanctions imposed over the conflict in Ukraine. Sistema, which also controls Russia’s biggest mobile phone operator MTS , says it considers the accusations against its Chairman baseless.
Sistema’s Moscow-listed shares were down 32 per cent, slashing the company's market capitalisation by some 100 billion roubles ($2.6 billion). In London Sistema’s global depositary receipts fell 34 percent.
The incident dampened the wider mood for Russian shares somewhat. The rouble-denominated MICEX index was about 2 per cent lower than Tuesday’s close, with big companies Gazprom and Rosneft off about 1 percent and Sberbank flat.
“Such a dramatic turn of events comes as a surprise regardless of the market knowing there was an open investigation into the privatisation of Bashkir Oil and Energy Group,’’ Sberbank CIB investment bank wrote in a note, referring to the oil company that later became Bashneft.
“The risk of a change in the shareholder structure of Bashneft escalates, a risk that now spreads to Sistema’s other assets,’’ the bank wrote.
Among Sistema’s main assets, Bashneft shares slid 22 per cent, while MTS was down 7 per cent. The Moscow Exchange responded to the panic selling of Sistema assets by temporarily restricting trading in shares of the holding company and Bashneft.
“Clearly all this comes at a particularly inopportune time for Russian markets, given concern over developments in Ukraine,’’ said an analyst for Standard Bank in London.
