Lenta's newly issued shares were only listed on Friday but dropped over 10% on Monday before recovering a little. This is the latest deal to show investors that big, attractive looking deals in Russia are as likely to go wrong as right. Before that, Tinkoff Credit Systems served much the same purpose. Even despite the recent woes of the TCS deal, however, Lenta still got many pulses racing across the market. Syndicate bankers close to the Lenta deal reported conversations with excited portfolio managers, animated by the firm's business plan and its exposure to the Russian consumer. But when those PMs ran back to their chief investment officers, who were still smarting from recent painful deals like TCS and surveying an increasingly messy geopolitical situation, rationality returned. In vetoing those orders they likely saved sentiment in emerging markets, in the medium term.
The investors that did take the plunge are hurting this morning. But there are fewer of them than there might have been, and those that are left are specialists with strategies too long term to be upset by this disruption — the top 10 investors by allocation took 60% of the deal, and the top 20 took 80%.
It's fair to say those left in the book took pretty fundamental views, and have stuck with the stock despite the pummelling.
That strategy is likely to work. If the crisis in the Ukraine fades from view, Lenta's share price will return to good health and reward those that stuck with it.
But the fast money funds that could have come into the deal should think about an alternative history where they bought it, sold out of it when things got sticky, and were left nursing 10% losses. And they should keep remembering it, and the others, over and over again, as the market recovers and Russian IPOs begin to flow once more.