Potential state IPOs must be preceded by settlements with minority shareholders of nationalized companies – Head of Univer investment group
The state, which has declared its intention to develop the capital market and carry out privatization through initial public offerings (IPOs), must first protect investors and fulfill its obligations to minority shareholders of nationalized joint-stock companies, says Taras Kozak, founder and president of Univer, one of the largest investment groups on the market.
"If you want people to invest in IPOs, you have to return what belongs to them. Then, maybe, people will be willing to invest. Sure, let the SBU or the Economic Security Bureau check to make sure that no 'Russian scum' or sanctioned individuals are among the recipients—but the state must honor its past obligations," he said in an interview with Interfax-Ukraine.
Previously, the idea of launching IPOs for state-owned companies and banks was voiced by Ruslan Mahomedov, head of the National Securities and Stock Market Commission (NSSMC), and Yuriy Katsion, advisor to the head of the President's Office and deputy board chair at Oschadbank responsible for corporate business.
"I don't really believe in this idea until the state turns to face the investor. Right now, the state doesn't see small investors – minority shareholders are nobodies in its eyes," Kozak said.
As evidence, he pointed to the late 2022 confiscation of minority shareholders' small stakes in companies like Ukrnafta, Motor Sich, Zaporizhtransformator, and others.
"If you wanted to seize oligarchs' shares – fine, do it. But how does a 5–7% free float affect anything? With 90–95% you can make any decision you want anyway. So why undermine trust? Some investor owns seven Motor Sich shares worth a few thousand hryvnias, and those shares are just taken away – no explanation. Maybe someday after the war, the state will return the shares, or maybe pay compensation – or maybe neither," the investment banker explained.
He believes that until the war ends, the state will not meet its obligations to minority shareholders in nationalized companies.
"That's why I don't believe in IPOs for Ukrnafta, Ukrposhta, or PrivatBank until then," the Univer chief added.
Kozak said he doesn't blame the NSSMC for either this situation or the sanctions imposed on the broker Freedom Finance Ukraine, which left more than 10,000 clients without access to assets worth about UAH 3.5 billion for nearly three years.
"The Commission wasn't informed and had no options… So yes, the regulator has its flaws, but I don't see it as at fault either in the Freedom case or in the nationalizations," Kozak said.
At the same time, the investment banker said he firmly believes in building – or rebuilding – a capital market in Ukraine.
"Not only do I believe in it, I'm actively working on it. Ukraine is a large country with a large population and a sufficiently diversified economy to support dozens of companies with billion-dollar capitalizations," he said.
He sees a market where securities of state-owned banks and companies, other banks, metallurgy firms, Nova Poshta, and other new businesses could be traded.
He also emphasized that Ukrainians are naturally inclined to invest, but they need guarantees – citing the strong pre-war demand for foreign securities via legal channels created by Univer and others.
"Can you invest in Ukraine? Yes – but only if investors are protected. And I'm not talking about protection from the war – that's obvious. I mean protection from government officials – so they can't just swoop in and seize minority stakes in the name of the state, so the Economic Security Bureau doesn't freeze your accounts, so there are no 'maski-show' raids. All these little things ruin the investment climate," Kozak said.
He expressed hope that reforms of the law enforcement system, the ESB, the tax service, and customs would eventually improve the investment climate.
"If that happens, Ukrainians and the Ukrainian economy will be fully capable of building a big enough capital market that we won't need the Warsaw Stock Exchange (WSE)," the head of Univer said.
He recalled that Ukraine had a fairly developed market on the Ukrainian Exchange up until 2012 – even with internet trading.
"There was a Ukrainian Exchange index, a futures contract based on it, even some options. There were big plans. But it all ended not because of a crisis, but because of a National Security and Defense Council (NSDC) decision to sanction the software the exchange used. Why not evaluate the potential losses of that decision before imposing sanctions? There weren't any real gains – and the market just died," Kozak said.
"So we have everything we need – except for the state's understanding that this capital market needs to be nurtured," he concluded.