Mediaboss Marketing

CTC Media Inc. (CTCM) plunged to a five-year low after President Vladimir Putin enacted a law capping foreign ownership in Russian media companies at 20 percent by the end of 2016.

The shares, which only trade in the U.S., slumped 2.8 percent to $4.86 in New York yesterday. CTC was listed on the Nasdaq stock exchange in 2006 and is the only publicly traded Russian television company. Stockholm-based Modern Times Group AB (MTGB) is the biggest shareholder, with about a 39 percent stake, while 36 percent is held by various U.S. and European investors, the company said in a statement last month.

CTC tumbled after Putin signed legislation lowering the threshold for foreign ownership in media companies from 50 percent. The tighter restriction comes as Russia increases its control over communications in the country amid a standoff with the U.S. and its allies over the Ukraine war. Putin has called the Internet a creation of U.S. spy agencies, and the government earlier this year banned anonymous public access to the Web.

It seems the worst is yet to come, Sergey Vasin, an analyst at OAO Gazprombank, said by phone from Moscow yesterday. The new law is signed into effect while slowing economic growth is already resulting in less revenue from ad sales. There is just no reason for any optimism.

Russias $2 trillion economy will expand 0.3 percent this year, the worst performance since it shrank in 2009, according to the median forecast of 38 analysts surveyed by Bloomberg. Growth has been squelched by international sanctions linked to the war in Ukraine.

CTC Media said in a statement that it is considering options including a capital reorganization and divestments to comply with the lower foreign-ownership threshold.

The company might consider restricting shareholder voting exclusively to domestic investors while allowing foreign stakeholders to receive dividends and other financial benefits without being able to influence management, said Konstantin Belov, an analyst at UralSib Capital.

There is no easy option for CTC Media to comply with the law, Belov said by phone from Moscow.

CTC Media will develop a solution protecting all of our shareholders to the fullest extent, Yuliana Slashcheva, the companys chief executive officer, said by e-mail. We will inform the market appropriately as soon as decisions are taken.

The new law takes effect in 2016 and gives companies a year to comply.

Follow this link:
Russias CTC Media Drops as Putin Restricts Ownership