Qiwi Plc (QIWI), an instant-payment operator that runs virtual wallets in collaboration with Visa (V) and operates cash-collection kiosks, is approaching the close of the 90 day lockup period following its secondary offering. On December 16th, substantial shares held by investment firms, directors, and executives will be unlocked for sale, likely leading to at least a brief decline in QIWI share pricing and presenting a shorting opportunity for aggressive investors.
QIWI is a provider of next generation payment services in Russia and the CIS with an integrated proprietary network that enables payment services across physical, online and mobile channels. The firm has distributed over 11 million virtual wallets and over 169,000 kiosks and terminals. Over 40,000 QIWI customers accept over RUB 39 billion in cash and electronic payments monthly from over 65 million consumers using its network at least once a month. The firm also provides advertising services through its interactive kiosks and collects huge quantities of consumer data through the billions of transactions it processes annually.
QIWI's business operates in an environment in which purchases are still largely made in cash; Russia continues to lag painfully behind the more developed world in terms of advanced payment methods. An Edgar, Dunn & Company report noted that, in 2011, 94% of the value of retail payments exchange in Russia was in cash.
QIWI's terminals give consumers a simple way to convert their cash to digital funds to make transactions that cannot be easily done in cash - making online purchases, paying bills, sending money to a friend, or buying more mobile minutes, for example. Payments on QIWI are generally quite small, and are limited to no more than RUB 15,000 per transaction; since these transactions are funded by cash, there's no need for users to undergo a registration process, which is a major barrier to entry for many users.
QIWI has seen increasing revenues and profits in recent years. Its revenues for 2010, 2011, and 2012 were RUB 6.16 billion, RUB 8.16 billion and RUB 8.91 billion, respectively, while its net profits for the same periods were RUB 768 million, RUB 721 million, and RUB 1.3 billion, respectively. The firm is in the process of expanding into new markets, including Belarus, the UK, and the US.
QIWI's primary competitors in Russia include Sberbank, Russia's largest retail bank that is majority-owned by the Russian state, and Alfa-Bank, one of the leading privately owned Russian retail banks, both of which have electronic banking systems and large retail networks.
There is certainly risk to investing in a firm based in Russia, since the country remains somewhat politically unstable and continues to have significant criminal elements involved in its business and governmental worlds.
Conclusion on this Financial Firm Share Unlocking
Many large investment firms have significant stakes in QIWI, and remain under pressure to return capital to their investors in the wake of the 2008 financial collapse. These firms may be likely to sell significant quantities of their shares at the end of the unlocking period. Some of the largest of these firms include Antana International Corporation, Saldivar Investments Limited, Mail.ru Group Ltd, and Mitsui & Co Ltd.
The millions of shares also held by Executives and Directors will also be unlocked, and though they are not under the same type of pressure to raise capital, many may sell in the interest of diversifying their profiles and for tax planning purposes.
The unlocking of a huge amount of shares provides aggressive investors with a shorting opportunity in December.