Many international investors in the technology and consumer sectors have considered NASDAQ-listed Ozon to be a promising bet. It’s the leading online retailer in Russia, one of the few countries where Amazon hasn’t established a major presence. The company has been doubling sales turnover on its platform every year and expanding its market share. In recent years, Ozon has been a standout growth story, with a valuation which has exceeded $10 billion.
What happened to Ozon in recent weeks has been a shock for investors. From February 28, the U.S. suspended trading of Ozon and other Russian company shares on NASDAQ. The company found itself hostage to the heightened tensions between Russia and the West over Ukraine, as the suspension of trading triggered a so-called delisting event which necessitated early repayment of convertible bonds.
After that, as Ozon disclosed March 9, a group of bondholders has formed a special committee and appointed investment bank Houlihan Lokey to conduct talks with the company with a view to finding a fair and sustainable solution for all stakeholders. In turn, Ozon hired financial consultant Alvarez & Marsal to advise on the situation and entered into discussions with an ad hoc group of bondholders and their advisers on the “consensual restructuring” of its obligations. Ozon aims to be in position to reach a standstill agreement with a significant number of bondholders in the near term and agree on long-term restructuring within the current financial year, as the company said in its annual report published in May.
The suspension of trading on NASDAQ also means most funds can’t sell the company’s American Depositary Shares (ADS) on the stock market. Some investors can try to swap them for Russia-traded shares, but this is quite difficult and not a viable option for many investors due to capital restrictions.
These developments could adversely affect Ozon’s ability to raise additional funding, the company said in its latest Annual Report. In addition, capital control measures recently implemented by Russia’s Central Bank may complicate the transfer of funds between the Ozon accounts in Russia and Cyprus, where the holding company that issued the bond is based.
Industry analysts tend to agree that in these circumstances, restructuring the bonds looks like a mutually beneficial solution which will allow the company to execute on its strategy in the interest of investors while full repayment, even it becomes technically possible, may undermine the company’s efforts. Negotiations with bondholders on restructuring are going well, and many of them are likely to agree on proposed terms, according to people familiar with the matter.
Ozon’s business fundamentals remain strong. The company increased gross merchandise value (GMV) 127% last year and is targeting an 80% growth this year despite geopolitical tensions. Having invested heavily in its own warehouse and logistics network, Ozon is now less dependent on third-party logistics operators and less susceptible to import restrictions. Another strength of the company is that, in addition to working with brands, Ozon has 90,000 merchants selling various goods via its marketplace, and offers a range of fintech solutions for entrepreneurs and their customers. This model makes the company more sustainable than traditional retailers who need to re-arrange their supply chain in response to trade restrictions.
Ozon said in its latest statements that it remains open to working with foreign investors. Funds and individuals interested in e-commerce and technology in markets across EMEA can still invest in a range of companies, including Allegro in Poland, Jumia in Nigeria, Hepsiburada in Turkey and Kaspi in Kazakhstan. Unfortunately, for now, they are effectively banned from getting on board with Ozon’s growth story – one of the most dynamic market prospects in the region.