Tonight we are set to get a pricing of the CTC Media (NASDAQ:CTCM) IPO, a Russian television network operator. The company broadcasts directly over the airwaves and directly by satellite and has also expanded its reach nationally by launching its own CTC network rated #4 in Russia according to reports.
Lead underwriters are Morgan Stanley and Deutsche Bank, with J.P.Morgan as the Co-Manager. The current plans are for 29.4 million shares at a proposed range of $16.00 to $18.00 per share, giving CTC Media a potential market value of $2.75 billion depending on price.
CTC Media owns and operates Russia’s CTC Television Network, which now apparently serves 1,100 cities across the country. It has a 10% audience and its signal is carried by more than 300 television stations and cable operators. It does not look as though it owns its programming, but licenses a limited number of runs for each program. Advertising currently accounts for 19% of its total broadcast time and 25% of its primetime broadcast time, which is actually at some risk due to advertising time change laws in Russia (see below).
CTC Media also recently launched its Domashny Network in 2005, which is the only domestic broadcaster to exclusively target women. CTC Media has supposedly been able to monitor expenses because of agreements with independent affiliates instead of having to spend as heavily on its infrastructure.
This ad model does not come without risks, as hinted above. As of July 2006, new Russian law will supposedly limit ads to only 15% of total broadcasting time and a total of 20% of broadcasting time per given hour. That percentage may also be declining to 15% per hour beginning in 2008. CTCM has reportedly signed agreements with most of its affiliates to raise its ad allocation and it looks to have price hikes of 15%, but there will not be any way to confirm this data on any exact basis. As Russia is often considered the Wild West of lawmaking and governing for near-Western capitalism, we'll have to see how the changes are implemented and how the new rules change the company.
On the IPO it looks like insiders are selling 24.5 million shares, 4.4 million of which will be acquired by exercising options concurrent with the IPO at only $1.33/share. This has impacted how investors have wanted to gobble up shares in an unfavorable stock market. It almost even has the feel of back-dating because of the fact that the options grant is concurrent with the IPO at such a low price, but Russia is Russia and the shot of making an instant 10-times the money may be the norm for corporate insiders there in a world that doesn't seem to care about these practices. These figures have been implied in the prospectus and there are descrepancies from source to source on these numbers, so this needs to be confirmed independently before hanging your hat on any firm numbers.
Current market conditions have made IPOs that aren't a lay-up somewhat challenging. The deal has also not been able to attract the massive interest initially hoped for, and it looks like it is a combination of the Russian-market volatility and the insider share sales on the IPO that have weighed on the offering. If it comes to market tomorrow, we'll get to see how the market treats it versus what the buzz has been before the deal.