Is Cian IPO Stock a Buy? Russian IPOs Are Hot in 2021
Russia’s real estate aggregator, Cian has raised $291 million in a U.S. listing. Is the IPO stock a buy?
Nov. 5 2021, Published 1:05 p.m. ET
So far, 2021 has been one of the best years for IPOs. The amount raised from new listings worldwide more than doubled YoY in the first nine months of 2021, according to Reuters. It's turning out to be a blockbuster year for Russian IPOs as well.
Currently, at least seven Russian companies are preparing offerings. The last time they were so busy in the IPO market was back in 2007 when a total of $21 billion was raised through IPOs. Amid this listing boom, another Russian company, Cian, is scheduled to start trading on Nov. 5. What's Cian's IPO forecast and should you buy it?
Cian is an online real estate classifieds platform in Russia. It has a leading position in the country’s key metropolitan areas. The company also ranks among the top 10 most popular online real estate classifieds globally in terms of traffic.
Cian’s IPO pricing
On Nov. 5, Cian announced the pricing of its IPO. It offered 18.2 million ADS (American depositary shares), each representing one ordinary share of Cian. Out of these, 4.04 million were offered by Cian and 14.17 million were offered by certain selling shareholders of Cian. Cian priced the IPO at $16 per ADS, which is the top-end of its previously indicated range.
Is Cian profitable?
Cian isn't profitable. In fact, its operating losses have been accelerating. For the six months ending June 30, 2021, its operating losses were $22.97 million, which is higher than the same period for 2020. In the prospectus, the company states that its path to profitability greatly depends on it maintaining its leading market positions, particularly in Moscow, St. Petersburg, and certain other regions. Currently, the operating losses remain high and there isn't a credible path to profitability.
Is Cian IPO a good buy?
The company has a strong presence in the online real estate market. According to management's estimates, most Moscow and Saint Petersburg real estate developers were present on Cian's platform in 2020.
Cian has a large addressable market as there's a lot of scope to digitize Russia’s residential and commercial markets. According to a Frost & Sullivan report commissioned by the company, its “core online real estate classifieds market is projected to grow at a compound annual growth rate (“CAGR”) of approximately 27% between 2021 and 2025.”
Although Cian isn't profit-making right now, that's the case with a lot of companies that are in a high-growth phase. As Cian expands, its expenses might increase at a higher rate than its revenues. However, that isn't a reason to pass this IPO. The growth potential in the market and the company’s market-leading position compensate for it. Cian's strong backers include Goldman Sachs and Elbrus Capital, which gives the company additional credibility.