MOSCOW, November 25 (RIA Novosti) - The State Duma, the lower chamber of the Russian parliament, approved in their first reading Friday amendments to a bill that will allow the "ring fence" to be lifted around shares in energy giant Gazprom and foreigners to buy stock.
The amendments, adopted by 338 against 91 Duma members, had been drafted by the Duma committee for energy, transportation and communications, and envision an end to the previous trading restrictions of the company's shares.
This new move will allow foreign entities to buy stock in Gazprom. Up to 49% of Gazprom's common shares will be publicly traded with no ownership restrictions. The government has proposed abolishing several presidential and government resolutions dating back to the 1990s that impose restrictions on the number of stock exchanges trading Gazprom shares, their quota for non-residents and set out procedures for acquiring Gazprom shares for non-residents.
The restrictions were designed to prevent a foreign takeover of Gazprom. The proposed legal acts would lift the "ring-fence" around Gazprom shares, allowing foreigners to buy the stock in Russia and abroad.
The government will retain its recently acquired majority control of the company. In fact, market estimates suggest that as much of 10% of Gazprom shares are currently owned by foreign entities through "gray schemes" grudgingly tolerated by the government and Gazprom.
Share liberalization will result in a huge increase in demand for the company's stock, and Gazprom will become Russia's biggest company by market capitalization. With a current market capitalization of $124 billion, Gazprom is priced much lower that its vast reserves of 114 billion barrels of oil equivalent would suggest. Judging by its international peers, in term of prices and reserves, Gazprom's market capitalization should be in the region of $300 billion.
