THE impending $30 billion (£15 billion) flotation of Rusal will be the biggest gauge yet of institutional appetite for Russian companies – and it couldn’t come at a more testing time.

On a political and business level, deep distrust has grown among western countries – particularly in America – over the Kremlin’s creeping repatriation of some of its major resources. First with Shell and now with BP, President Vladimir Putin’s desire to put assets back under state control has understandably made investors nervous about their exposure to Russian resource stocks.

Now a group of oligarchs wants to list Rusal, the world’s biggest aluminium company, on the London Stock Exchange. Unlike Rosneft, the Russian oil giant that raised $11 billion last year, this is not a global depositary receipt, but a main listing. In other words, Rusal will move its headquarters here and will have to comply with all the onerous reporting standards of a full listing.

Investors will be asking if capitalism is a one-way ticket. Rusal wants to take advantage of London’s huge liquid pool of institutional capital, but its country of origin appears to play by a different set of rules. Rusal is fundamentally a good company with a prized collection of assets, but it may find itself dragged into a political game.

It could reveal how far Russia is prepared to embrace western capitalism. With one hand it wants to raid our institutions and with the other it wants to seize back resource assets that had passed into control of foreign companies. At the same time Putin has recently been using language reminiscent of the Cold War.

President George Bush is attempting to repair his country’s deteriorating relationship with Russia by inviting Putin to visit the family compound in Kennebunkport, Maine, next month.

It’s a move in the right direction but the business community needs a clear guide from Putin about his policies on overseas investment.

A number of investment banks and western companies have set up shop in Russia, but they remain sceptical over their long-term prospects.

Rusal is not the only company from the former Soviet Union that wants to raise money in London. So, too, does Ferrexpo, which is looking to raise £250m, which would make it Ukraine’s first ore mining company to be listed on our stock exchange. There is some chatter that this company is struggling to win the confidence of potential investors.

However, it would be wrong to bet against Rusal’s float succeeding. Investors rarely turn away money-making opportunities. Rosneft had confiscated its biggest asset from a jailed oligarch but even that fell within the City’s moral compass. However, against a backdrop of worsening relations with Russia, the Rusal float may trigger a much wider debate.

Laughing cavalier

DAVID RICHARDSON, the former finance director at Whitbread, did the right thing in walking away from his role as chairman of Sports Direct.

As I said two months ago, he has been made to look a muppet by his deputy chairman and largest shareholder, Mike Ashley. Since taking the job earlier this year, Richardson has met Ashley only five times and has established no authority over the executive team. Richardson’s temporary stand-in, Simon Bentley, will fare little better.

Since Ashley floated his discount sports-shop chain earlier this year he has treated the City, his investors and advisers with repeated contempt. All that appears to matter to him is that he managed to pocket £920m in cash and retain a 57% stake in his business. The company may be worth a third less than its £2 billion debut, but he couldn’t seem to care less.

Merrill Lynch, the investment bank that floated the company, has rightly come in for much criticism. The bank had not done its homework in finding out what it was taking on and it overpriced the stock. It was floated on a forward p/e multiple in the high 30s and it never made sense. Even now (if the company makes £105m this year) the shares are on a ritzy multiple of about 20 times.

What is now left is a company that has lost City confidence, unable to raise equity or issue shares. It has an invisible finance director and an entrepreneurial founder who has the attention span of a gnat.

No sooner had Ashley floated Sports Direct than he was busy buying stakes in Adidas and Newcastle United, possibly in conflict with Sports Direct and without any explanation to his investors. The flotation was a heist, a daylight robbery and Ashley didn’t even need a mask. With Merrill around who needs one?

Mega milestone

AS milestones go, the one passed by Apple last week was significant. A decade ago the company was nearly bust, but last week thanks largely to the iPod, its market valuation passed the $100 billion mark – to close the week at $102 billion.

The surge in the share price over the past five years shows the power of stock-market momentum. It also highlights how the early pioneers of the computer age are now being overtaken by those able to crack consumer technology.

Apple, which is sitting on a $10 billion cash pile, is now bigger than Dell, the one-time giant of computer manufacturing. It is still smaller than the software and internet giants, but it is catching up.

The industry goliaths were once dominated by those who controlled the big corporate accounts. With home broadband becoming a global phenomenon it is those companies that can make products and software for this trillion dollar-plus market that will be tomorrow’s big winners.

john.waples@sunday-times.co.uk

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