Ozon IPO soars as Russian retail investors just keeps on coming

The value of funds that Russian retail investors are channelling through brokerage accounts rose by $17.3 billion to $198 billion in Q3, the country’s central bank reported yesterday, with the online retailer Ozon the latest to benefit from pent-up demand.

OzonAfter a three-year hiatus, Ozon is the most recent in a procession of companies that have staged IPOs this year, and it is also one of the most successful; an operation that started out as an Amazon-style on-line bookstore in 1998 raised more than $1 billion through its initial listing and saw its total valuation top seven times that much. Ozon’s IPO follows last month’s listings from housebuilders Samolet and the shipping major Sovcomflot.

The scarcity of such opportunities for Russian retail investors to redirect their funds from low-interest saving accounts into something more exciting has played a big part in this new gold rush, but Ozon has been particularly fortunate in its timing, as investor confidence has been bolstered by relatively high oil prices and optimism that vaccines against COVID-19 could be ready sooner than expected

“We are seeing huge interest from [Russian retail] investors in the stock market,” said Alexander Ivanov, head of one of the central bank’s analytics departments, after Russian stock markets surged to new highs on Thursday. “As of Sept. 30, more than 7.6 million brokerage accounts had been opened, of which 3.4 million were opened by investors during the course of the current year.”

Ozon has found itself in the right place at the right time in another way too. According to Data Insight, online sales of physical goods in Russia could reach the equivalent of $32 billion by the end of 2020 and as much as $90 billion by 2024. But Russian retail investors face making harder choices than their counterparts in the US, where Amazon alone accounts for around 50% of domestic e-commerce. The Russian market is, in contrast, highly fragmented and its five largest online retailers account for less than 25% of all transactions. Expect some consolidation.