On Friday, March 26, qualified investors were able to trade Telegram convertible Eurobonds on the St. Petersburg Stock Exchange. The face value of the security is $ 1000, the yield to maturity is expected at the level of 6.3-7%.
If you focus on the data of the first trades, it is clear that private wealthy clients showed interest in these securities, for whom the yield above 6% turned out to be attractive, notes a private investor and founder of the School of Practical Investing Fyodor Sidorov.
According to him, the activity in the securities is kept at an average level, which is “quite normal” for the bonds of the third echelon on the Russian market. “Based on the results of the first trades, it is obvious that there was a certain interest among investors, trades were held with an average intensity,” notes Alexey Sokolov, managing partner of Grid Capital. “In the medium and long term, the attractiveness of the securities will depend primarily on how the company develops.”
The high currency coupon, coupled with the well-known brand, is likely to generate interest from retail investors, he notes. But it should be borne in mind that these securities are convertible into shares and their liquidity is relatively low. However, given the recognition of Pavel Durov’s brand and the general trend towards the growth of the IT sector, the liquidity of Telegram securities in the medium term will increase, Sidorov is sure.
The dollar yield on Telegram bonds looks very attractive, especially at a time of extremely low interest rates and the hype around the tech sector, said Michael Capone, lead strategist at Exante. In his opinion, the higher risk premium at the initial stage was formed due to the failure of Durov to raise funds in the United States through ICO.
Recall that then, after the SEC banned the participation of American investors in the placement, the entire campaign to raise capital, in fact, was given up and the investors who had entered earlier lost about 30% of their funds. “Entering the debt market was determined by the need to attract additional financing due to an unsuccessful attempt to issue its own digital currency,” Sokolov notes. “And the question of the company’s profitability and the future monetization of the business remains open.”
Interest in Telegram bonds is also constrained by the fact that the company does not publish its financial statements. In addition, only qualified investors have access to this tool. “Therefore, it turns out not so much market trading as the company borrowing money from large professional stock market participants at a certain percentage,” Sidorov notes.
However, the very small lot set for Telegram bonds ($ 1000) opens up opportunities for a wide range of investors, Capone notes. Due to this, in the coming days and weeks, we can expect an increase in demand, which will put pressure on bond yields.
“We saw a very cautious placement of bonds, but gradually they rise in price (their yield falls), reflecting the expanding interest in the instrument. It is quite possible that their yield will fall below 5% by the end of April. With such yields, they will no longer look so attractive to many investors, and this promises to stabilize the price, ”he summarizes.
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