If subscribers to UC Rusal’s initial public offering got as far as page 282 of the 1,141-page prospectus before collapsing with exhaustion, they might have noted that the world’s biggest aluminium producer was proposing to pay its chief executive up to $75m in restricted shares, just for his part in pulling off a listing in Hong Kong, at the company’s fourth attempt. If that seemed a touch generous – Oleg Deripaska is hardly rubbing by on a base salary of $10m, five times his equivalent at BHP Billiton – the investor might have been comforted by the caveat that this “IPO bonus” would be “subject to certain conditions.”
Wednesday’s disclosure that Mr Deripaska is to collect almost all of that entitlement is disturbing. “Conditions” should surely have been set with reference to the success of the offering, which has been a crashing disappointment. Since it started trading on January 26 Rusal has lagged the local benchmark by almost a quarter, apparently impervious to broker recommendations (seven buys, no sells). If it had entered the Hang Seng that day, it would now rank as easily the worst performer among the index’s 44 stocks. Operational performance isn’t compensating much. Yes, Rusal swung back into the black this week. But strip out non-cash gains from shares in associates, and the net loss for 2009 was $600m.
Given that Mr Deripaska’s EN+ group holds 7.2bn of Rusal’s 15.1bn shares, the award of another 51m won’t change an awful lot. Hong Kong-based governance groups are not up in arms, largely on the grounds that investors were forewarned, and that homegrown tycoons have behaved a lot worse. Still, minorities should pause to reflect. While this is a legal and peculiarly inventive way of looting the company, it is still looting all the same.
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