Nasdaq Halts Trading In ‘Russian Amazon’ As Ozon Stock Crashes

What a difference a year makes. In March 2021, Russian e-commerce giant Ozon Holdings was still basking in a recent $1 billion Initial Public Offering (IPO), announcing a $750 million bond issue and at the early stage of 12 months of soaring online sales in Russia.

It was enough to see Ozon dubbed the “Russian Amazon,” as it locked beams on Russian e-commerce leader Wildberries.

In March 2022 its shares – which peaked at over $62 in April last year – are languishing at $11.60 and the Nasdaq has halted trading since Monday anyhow. Meanwhile, the company is applying to have its Ozon Bank business removed from those Russian financial institutions slapped with sanctions by the U.S. Treasury, claiming an error.

For anyone who invested in the unstoppable rise of Russian e-commerce when the IPO was launched in New York in November 2020, Ozon looks set to deliver little but bad news.

Ozon had come off a great 2021. According to preliminary unaudited results, gross merchandise value (GMV) exceeded 445 billion rubles (then $6 billion) in 2021 — up 125% on 2020 — to close the gap on market leader Wildberries. The company said it delivered more than 220 million orders — around three times more than in 2020 — and by the end of 2021 boasted over 25 million monthly customers.

That growth was partly down to the pandemic, which bolstered so many online businesses globally, and also rapid expansion of products ranges. Assortment grew more than sevenfold year-on-year, exceeding 80 million individual products by the end of the year. 

Ozon New York IPO

Having raised almost $1 billion through its IPO, plus a $75 million bond issue in early 2021, Ozon had continued investing to expand its logistics capacity of fulfillment and storage warehouses, dark stores, pick-up points, lockers and courier services. 

Ozon CEO Alexander Shulgin declared the results “fantastic” and pointed to the company’s “incredible progress in cultivating high-frequency shopping habits” among its customers.

Indeed, Ozon hit the stock market with a splash. Its $990 million IPO in late November 2020 became Russia’s biggest since the $1.5 billion raised in 2017 by En+ Group, as investors scrambled to capitalize on Russia’s e-commerce boom.

Russian conglomerate Sistema and a Baring Vostok group of funds each owned a 45% stake in Ozon before the listing, priced at $30 per American depository share (ADS), above the target range of $22.50 to $27.50. Strong demand also prompted Ozon to increase the number of shares on offer from an initial 30 million, reducing the Sistema and Baring Vostok stakes to 33.1% each.

The IPO, with shares trading on the Nasdaq Global Select Market and in Moscow, valued Ozon at an estimated $6.2 billion, with the shares surging to peak at over $62 in April 2021 before declining since the summer to currently trade at a lowly $11.60.

Ozon Issues Sanctions Statement

On Monday, Ozon Holdings issued a statement to stress that it is not subject to any sanctions at the moment, while noting “there are no regulatory restrictions on the ability of U.S. persons to acquire and trade in Ozon’s securities, and non-U.S. persons are not exposed to any U.S. secondary sanctions risks in connection with such transactions.”

The statement continued: “Based on the currently available information, the company’s management believes that there is no direct material adverse effect of the U.S., EU and other sanctions on our current day-to-day e-commerce platform’s operations and our ability to conduct business. We primarily operate in Russia, and over 95% of GMV including services is generated in Russia. Over 90% of our buyers and sellers are also located in Russia.”

The company claims strong liquidity, with approximately 80% foreign exchange liquidity, plus “sufficient ruble liquidity for our current day-to-day operations”.

Ozon has also filed a request to the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department to remove Ozon Bank from the Specially Designated Nationals and Blocked Persons List “since Ozon Bank is not linked to Sovcombank.”

Ozon did, however, concede that its business is likely to be indirectly impacted by sanctions, particularly if they have a continued impact on the Russian economy. That means both trading volumes and difficulties raising capital, which could hit investment into infrastructure expansion and operations.

Ozon expects to release its full-year 2021 financial results on April 5. They are unlikely to make pretty reading.