#Leaving #Russia #profitable #option #listed #companies
(BFM Bourse) – About a thousand companies have chosen to withdraw from Russia following the military invasion of Ukraine under the pretext of “denazification” launched on February 24. Those who preferred to cut ties, often at the cost of significant depreciation, nevertheless made the right choice, a Yale University study reveals.
The attack on Ukraine has put companies historically established in Russia in a dilemma: simply stop operating in a country that has committed such aggression against another sovereign state, remain there to fulfill ongoing contracts but not pursue any new projects, or do more or less as if nothing had happened? The decision arises from a moral but also an economic point of view, also taking into account the impact of international sanctions.
The exit announcements quickly multiplied and more than three months after the start of the conflict, the sanction of the markets now seems clear: leaving Russia was the best financial option, many companies recovered even more in capitalization than they had lost in Asset depreciation. , according to a study by Jeffrey Sonnenfeld, Steven Tian, Steven Zaslavsky, Yash Bhansali and Ryan Vakil of the Yale University School of Management in the United States.
Professor Sonnenfeld and his team have compiled a list of more than 1,200 large companies that have publicly expressed their position on whether or not to continue their activities in Russia, reviewing financial newspapers, regulatory filings with authorities, market reports, press releases, etc as well as various non-public sources (notably the Yale Alumni Network). They then classified these companies into five groups: A – withdrawal made by writing off their assets on the spot B – activity suspended but with the possibility of returning to it C – certain activities continued but significantly revised downwards D – volume of activity maintained but new projects frozen F: company completely resists calls to leave Russia
The researchers then looked at how companies performed based on their ratings and found that those rated F (often used for “failure”) underperformed their peers. Among US companies, for example, and during the period from February 23 to April 8, those that withdrew completely (70 rated A) gained an average of 4.36%, while those rated F (16) did not. they won nothing. Among European companies, 64 A-rated companies gained 3.44% on average, while F-rated companies (29 companies) lost 8.12% on average.
A clean break worth it
From this analysis, it is clear that the performance of companies that have made a complete break or permanent exit from Russia has been much better than that of companies that stubbornly resist demands to reduce their activity in the country. In addition, several companies that have recorded significant asset write-downs (Heineken, Shell, Exxon, Carlsberg, AB InBev, and Société Générale) have actually benefited from much greater value creation (in the sense of increased capitalization) than book losses. Collectively, these six groups wiped $14 billion off their balance sheets, but “gained back” $39 billion in capitalization. BP, for its part, registered the largest depreciation -25,000 million dollars- and if the British had not fully recovered them during the study period, the stock still presented a positive behavior.
“Clearly, the beneficiaries of the funds [investisseurs] unambiguously consider that the risks associated with remaining in Russia, when almost 1,000 multinationals have chosen to withdraw, clearly outweigh the cost of withdrawal.
Guillaume Bayre – ©2022 BFM Bourse