Gazprom
Gazprom and Itera: A Case Study in Russian Corporate Misgovernance
"I'm going to tell you a war story-my war story," opened Browder. " It's one that involves Gazprom, Itera, and PricewaterhouseCoopers. But I'm not a diplomat so this won't be diplomatic," he cautioned. As an investor, he says he looks to find companies whose stock is cheap, and Gazprom is "by far the cheapest oil and gas company in the world," if one divides the value of the company by its total reserves.
Because the market discounts virtually the entire value of Gazprom with the assumption that 99% of its assets are stolen, Gazprom's reserves trade at 10 cents for energy equivalent to one barrel of oil. (Exxon Mobil's reserves, by way of comparison, trade at $13.80 per barrel.) Eighteen months ago, deciding he needed a better understanding of the factors underpinning Gazprom's undervaluation, Browder dug around a bit using public information and found that the stealing was "so brazen" that Former CEOs Rem Vyakhirev and Viktor Chernomyrdin and others transferred assets openly to members of their family. "The arrogance was so extreme that there was no cover-up whatsoever," Browder remarked. "But that was helpful to us, because it enabled us to paint a very accurate picture of what had been stolen."
In October 2000, Browder's investigation pinpointed seven dubious transactions that stripped enormous value away from Gazprom. These seven companies - Purgaz, Rospan, Tarkosaleneftegaz, Sibneftegaz, Achimneftegaz, Vostokgaz, and Severneftegazprom - were worth $5,805 million to Gazprom, but were sold away for a total of $325 million between 1997 and 2001, a lost value of 5,480 million dollars. In losing these assets, Gazprom lost just under 10% of its total reserves, a quantity comparable in size to Exxon-Mobil's entire reserves worldwide.
So, Browder discovered that though the markets perceived that 99% of Gazprom's assets had been stolen, in reality only 10% had been. Browder said he was impatient
"I'm going to tell you a war story-my war story," opened Browder. " It's one that involves Gazprom, Itera, and PricewaterhouseCoopers. But I'm not a diplomat so this won't be diplomatic," he cautioned. As an investor, he says he looks to find companies whose stock is cheap, and Gazprom is "by far the cheapest oil and gas company in the world," if one divides the value of the company by its total reserves.
Because the market discounts virtually the entire value of Gazprom with the assumption that 99% of its assets are stolen, Gazprom's reserves trade at 10 cents for energy equivalent to one barrel of oil. (Exxon Mobil's reserves, by way of comparison, trade at $13.80 per barrel.) Eighteen months ago, deciding he needed a better understanding of the factors underpinning Gazprom's undervaluation, Browder dug around a bit using public information and found that the stealing was "so brazen" that Former CEOs Rem Vyakhirev and Viktor Chernomyrdin and others transferred assets openly to members of their family. "The arrogance was so extreme that there was no cover-up whatsoever," Browder remarked. "But that was helpful to us, because it enabled us to paint a very accurate picture of what had been stolen."
In October 2000, Browder's investigation pinpointed seven dubious transactions that stripped enormous value away from Gazprom. These seven companies - Purgaz, Rospan, Tarkosaleneftegaz, Sibneftegaz, Achimneftegaz, Vostokgaz, and Severneftegazprom - were worth $5,805 million to Gazprom, but were sold away for a total of $325 million between 1997 and 2001, a lost value of 5,480 million dollars. In losing these assets, Gazprom lost just under 10% of its total reserves, a quantity comparable in size to Exxon-Mobil's entire reserves worldwide.
So, Browder discovered that though the markets perceived that 99% of Gazprom's assets had been stolen, in reality only 10% had been. Browder said he was impatient