What happens to Russian ADR's?

We are often asked what will happen to unconverted ADR's. The honest answer is: we don't know. We do know that the ADR programs have expired for most issuers and that this allows the depositary banks (BNY, JPMorgan, Deutsche Bank, Citibank and RCS issuer) to sell the shares that are underlying the ADR's and distribute the cash received (after costs are subtracted).

There is a concrete example of this. JPMorgan participated in the tender offer that was launched by Magnit supermarkets (https://www.magnit.com/en/shareholders-and-investors/project/). Part of the tender offer was a 50% discount compared to the average share price on the Moscow stock exchange over a 6 month period. Permission would normally be required from the Russian government for such a sale. The current discount that the Russian government committee applies is 60% (https://minfin.gov.ru/ru/permission/79-81?id_57=309307-vypiska_iz_protokola_zasedaniya_podkomissii_pravitelstvennoi_komissii_po_kontrolyu_za_osushchestvleniem_inostrannykh_investitsii_v_rossiiskoi_federatsii_ot_15_oktyabrya_2024_goda__2681). We do not have indications that the depositary banks are currently actively pursuing similar deals or are in contact with the government committee to apply for permission. The depositary banks also have the discretion to open the books and facilitate conversion even after the depositary program has formally ended. Many depositary banks facilitated conversion back in the fall of 2024 for depositary programs that had formally ended. We feel that depositary banks may again decide to open the books for conversion should such opportunity open up. At the same time the depositary banks will probably start preparations for selling the ordinary shares underlying the depositary receipts, hopefully in deals that do not involve the huge discounts that currently applied.