What’s the Difference Between FTSE 100 Listed Russian Stocks and an Old Ferrari?

Some prime examples include the 1989 launch of the F40 by Ferrari. At the time, Ferrari said they would only make 400 examples, of which 213 would be destined for the United States. This spurred a frenzy of orders, and as the F40 was launched during the height of the exotic and classic car boom, investors could not get their check book out quickly enough.

Check book… How 1980s!

Well-heeled people lined up in their droves to place an order for an F40, and the waiting list was long, and the order book full within a very short time.

Even though Ferrari eventually made over 1,300 examples of the F40, that still went nowhere toward satisfying the demand and it was viewed as an investible asset. During 1989, places on the waiting list were changing hands for over £2 million.

Suddenly, however, the biggest recession since the second world war hit the British economy, interest rates rocketed to 15% which would be unthinkable to anyone who is under 30 years old, and the cars became worthless.

They weren’t even very good cars.

This scenario certainly taught many speculative investors a very hard lesson, that being the principle that even items perceived as finite, or as limited-run works of art or folklore, can lose their value overnight.

This is now the case for certain blue-chip stocks on London Stock Exchange’s FTSE100 index.

Who would have ever thought that the stock of British giants in evergreen industry sectors such as those within the multinational vertically integrated steel manufacturing and mining sector, whose offices are in the utterly stable financial center of the City of London, would be subject to sudden de-listing?

Evraz is one particular company that is in danger of that today.

Evraz is a veritable giant. Established in 1992, it has grown to encompass many global markets and in the financial year of 2021, it made an annual revenue of $13.224 billion.

That places it firmly within the prestigious list of top blue-chip, highly capitalized companies within the FTSE100 index on the London Stock Exchange.

Just a few weeks ago, it would have been unthinkable that such a company would face a de-listing from such a prestigious position in the stock markets, and even more unthinkable that it may disappear from London altogether.

Why would this happen?

The reason is simple. Evraz began its life in Moscow, and was initially a Russian company. To this day, it has major operations in the Caucasus, including in Kazakhstan, and even more major operations in Russia and Ukraine.

Although its headquarters is in London and it is a London listed company, it is chaired by Alexander Abramov, a Russian former scientist who became an industrial magnate. To this day he still holds Russian citizenship and resides in Moscow, his home town.

Its CEO, Aleksandr Frolov, is also a Russian citizen.

Given the current bandwagon that absolutely every western organization is jumping on for cutting all ties with anything Russian, it is now looking likely that Evraz may well disappear from the London Stock Exchange entirely, let alone the FTSE100 index.

It has been confirmed this morning that Evraz, along with another firm with a similar management structure, Polymetal International, are set to be removed from their London listing.

Ordinarily, such an announcement would be likely to send investors running for the Ural Mountains rather than just running for the hills, but in this case something utterly bizarre has happened.

Evraz stock plummeted during the course of all of last week and the beginning of this week, due to speculation relating to sanctions on Russian business, individuals and its currency, therefore giving rise to the belief that conducting business in a Western country with a Russian company would become very difficult indeed.

However today, on the announcement that Evraz will be removed from its listing in London, the stock actually began to rise again!

Evraz stock finished the trading session in London yesterday at 104.5p per share, and then when the markets opened this morning, it rose to 126.05 just an hour into the session, before going back down to 104p again by 11.00am UK time.

Talk about volatility!

Until yesterday, Evraz stock had declined in value by an astonishing 47% in just five days. Such levels of volatility are almost unheard of among big-cap blue chip stock, except for in very unusual circumstances such as the ones being faced right now.

In 1989, after people had paid £2 million to put their name on the waiting list for a Ferrari F40 which had a list price of just £140,000, and then losing their investment when the cars turned out to be worthless, many were reluctant to go down that path again.

A very long period of time elapsed before classic or rare performance cars were worth anything and for years the F40 was of little value above its original list price.

Today, however, an immaculate Ferrari F40 in original condition would fetch between £5 million and £12 million.

Maybe there are some investors in Evraz who remember 1989 only too well.

Andrew Saks, Head of Research and Analysis at ETX Capital

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