October 21, 2015, 23:35 / Business

Gazprom may buy shares from the market

But investors do not believe in the feasibility of these plans Mikhail Serov

To maintain their capitalization, many gas companies around the world use buy-back / E. Razumny / Vedomosti

Gazprom . may soon carry out a buyback of its shares, TASS reported, citing a source Vedomosti's interlocutor, close to Gazprom, confirmed that this issue was discussed by the board of directors and is now being calculated. Gazprom shares are deep at the bottom, there is a bearish game going on, it makes sense to take advantage of this, he explains. A Gazprom representative declined to comment.

Over the past two years, Gazprom’s capitalization on the Moscow Exchange has remained almost unchanged with minor fluctuations; now it is about 3.3 trillion rubles. Although in the spring of 2013 its capitalization was 20% lower - 2.6 trillion rubles. On the LSE since the beginning of 2014, Gazprom has fallen in price by 45% to $52 billion. The company's free-float is almost 49% of shares, of which 28% is traded in the form of ADR.

Earlier this week, Goldman Sachs and HSBC changed their recommendation for Gazprom ADR from “hold” to “sell.” Goldman Sachs reduced their estimate by 11%, and HSBC by 22%. Analysts at Goldman Sachs explain that Gazprom is expecting weak financial results in the third quarter, but the company is increasing capital expenditures, and a possible increase in taxes could have a negative impact on its dividends.

The Gazprom Board of Directors on Tuesday approved an increase in the 2015 investment program by almost 30% to RUB 1.043 trillion. And in 2016, the government wants to receive an additional 100 billion rubles from Gazprom. taxes due to the growth of mineral extraction tax. Several federal officials told Vedomosti that to partially offset the tax increase, Gazprom is asking to be allowed to pay lower dividends. This issue will be decided by the government, Interfax reported with reference to Viktor Zubkov, Chairman of the Board of Directors of Gazprom.

The company needs to support its quotes, but “the market will not believe [Gazprom’s plans to buy back shares],” says an acquaintance of the concern’s top manager. On Wednesday, following reports of a possible buy-back, Gazprom shares on the Moscow Exchange fell in price by 18.00 Moscow time following the fall of the MICEX index by almost 1%.

In a similar way, Gazprom allowed a buyback in January 2014. Then the deputy chairman of the concern’s board, Alexander Medvedev, said that the best time had come for this. Shares can be bought cheaper and then placed at a higher price, while simultaneously maintaining investor interest, the top manager explained. But the ransom never came.

Theoretically, Gazprom could buy back some shares for subsequent listing on the Hong Kong Stock Exchange, one of Vedomosti’s interlocutors believes. Although plans to locate in Hong Kong are not moving much, he notes.

To maintain their capitalization, many gas companies in the world use buy-back, including the Russian Novatek , notes Raiffeisenbank analyst Andrey Polishchuk. Gazprom . is probably just studying this issue for a very long time, but sooner or later it will come to this point, following its competitors, the expert believes