"Kyivstar goes public: what’s behind the bold stock listing on the U.S. exchange?"

The largest mobile operator in Ukraine is preparing to become the first domestic company to list on the American stock exchange. Choosing a less than ideal time for this move, the parent company of "Kyivstar," Veon, has tentatively agreed with the investment firm Cohen Circle to list the operator's shares on Nasdaq..

However, the process of going public will differ from a traditional IPO. Instead of issuing new shares to raise additional funds for business development, this will effectively involve the sale of a stake by the international group Veon.

Going public is a risk for any company. For "Kyivstar," whose assets and entire operational activities are concentrated in a country where the largest war in Europe in the last 70 years has been ongoing for three years, this step may seem like madness.

Representatives of the mobile operator have previously mentioned this. They emphasized that entering international markets amid war is a highly risky idea. Despite the fact that the security situation in Ukraine has not significantly changed, the mood within the company appears to have shifted.

Veon claims that transforming "Kyivstar" into a public company will enhance the investment appeal of the entire group. However, the details of this strategy remain undisclosed.

How exactly will "Kyivstar" make its debut on the American stock exchange Nasdaq, and what other motives might the company have aside from attracting investments?

Updated: Comments from Veon have been added to the material.

"Indirect" share placement

Typically, a company's market entry occurs through an initial public offering (IPO). This is a process during which ownership rights to a business are transferred to a foreign company that issues shares and offers them for purchase to a wide range of investors.

Thus, the main owner of the business shares their stake and, in return, receives free financial resources (in terms of servicing costs) for the company's development. Such capital-raising stories have been known to the public since the late 2000s when Ukrainian businesses listed in Warsaw, London, or Frankfurt.

However, private companies can also go public without adhering to the classic IPO procedure. There exists a mechanism called SPAC (Special Purpose Acquisition Company) - a way to go public through a "special purpose company."

It is through one of these that Veon plans to bring "Kyivstar" to the Nasdaq stock exchange in the USA. To understand how the largest mobile operator in Ukraine will become a public company, it's essential to explain how SPACs operate.

The story of each SPAC begins with an IPO known as a blank-check IPO. The concept is that investors buying SPAC shares are essentially investing blind, hoping that the company's management will strike a lucrative deal with a promising private business.

Therefore, creating a SPAC and raising funds through an IPO requires its leaders not only to have an impeccable reputation but often also a well-known name that helps attract investments.

Veon has signed a letter of intent with the investment company Cohen Circle. Founded in 2015 by American lawyer and financier Betsy Cohen along with her son Daniel, Cohen Circle specializes in creating and financing SPAC companies. One of them is Cohen Circle Acquisition Corp., which trades on Nasdaq and focuses on financing fintech and technology projects, having already raised over $5 billion.

According to the rules of the U.S. Securities and Exchange Commission (SEC), SPAC shares are issued at a fixed price - $10 per share. The raised funds are held in a trust fund. After the IPO, a SPAC has a limited time frame (usually up to two years) to find a company to merge with.

If a deal does not occur within this timeframe, the SPAC is liquidated, and the collected funds are returned to investors. Merging with companies connected to the SPAC management is also prohibited.

To execute the agreement for "Kyivstar" to go public, a restructuring of Veon's business must take place. Currently, the shares of the Ukrainian mobile operator are owned by Veon Holdings, which also owns the operators Jazz (Pakistan), Banglalink (Bangladesh), Beeline (Kazakhstan), and Beeline (Uzbekistan). Since Veon is only listing "Kyivstar," other assets must be excluded from Veon Holdings.

After merging with Cohen Circle Acquisition Corp., Veon's parent company will retain a majority stake in the newly formed company (SPAC). Additionally, Veon will continue to own several subsidiaries of "Kyivstar," along with separate assets and liabilities (for example, the "Helsi" service).

Why "Kyivstar" wants to become a public company

In October 2023, the president of "Kyivstar," Oleksandr Komarov, stated in an interview with Forbes that the operator's entry onto any international exchange during wartime is impossible. He believed that in wartime, shares would trade "at a significant discount."

However, just a year later, Veon's CEO Kaan Terzioglu expressed a radically opposite opinion, stating that the group is considering an IPO for "Kyivstar" in the USA in 2025.

Why did Veon choose SPAC instead of a traditional IPO? SPAC allows companies to go public more quickly and avoid the complex process of valuation and capital raising through an IPO since SPAC already has funds. This reduces time and uncertainty but may also decrease transparency for investors.

It is worth noting that only a portion (usually about 20%) of the shares purchased by the SPAC becomes available for trading on the exchange immediately. The remaining shares, still owned by previous shareholders, while receiving public status, may be restricted by a lock-up period (a period during which founding investors, managers, and major shareholders cannot sell their shares in the market).

For instance, when Social Capital Hedosophia Holdings acquired 49% of Virgin Galactic shares from British businessman Richard Branson for $800 million, all of the company's shares became public after the deal was finalized. Meanwhile, the other 51% of shares, which remained in the hands of previous shareholders, including Branson and his investors, could have been subject to a lock-up period.

According to official statements, "Kyivstar's" entry onto Nasdaq is expected to enhance the investment appeal of Veon's key assets. However, sources in the telecom market indicated that after Terzioglu's initial statements about the IPO, there was speculation that a potential stock market entry might dilute the stake of LetterOne, which is owned by sanctioned Russian oligarchs Mikhail Fridman and Andrei Kosogov, in "Kyivstar."

"Veon Group has been listed on Nasdaq since 2013, which provides us with greater visibility among American and international investors as a leading stock exchange for technology companies like ours. The path we have started for "Kyivstar's" listing will make "Kyivstar" the only purely Ukrainian investment opportunity visible and more accessible to American investors," - the company’s press service explained.

However, in the case of going public through SPAC, the majority stakes of Veon must be maintained. Thus, the notion of diluting sanctioned Russian stakes becomes unlikely. "Everything will depend on how the deals are organized. Based on official statements, it is still difficult to understand whether there will be dilution of shares since Veon and its shareholders will remain," notes an analyst from one of the investment firms.

Political protection and blocked dividends

In October 2023, the Shevchenkivskyi District Court seized all corporate rights in Ukraine owned by sanctioned oligarchs Fridman, Petro Aven, and Kosogov. The seized assets included the corporate rights of two mobile operators: "Kyivstar" and lifecell.

If the inclusion of lifecell shares among these assets surprised many, the response actions regarding the largest operator were anticipated. In the following months of 2023, government representatives repeatedly stated that the share of corporate rights of "Kyivstar" was one step away from nationalization.

Despite these statements, this step was not taken for over a year. After numerous court proceedings involving 15 motions and eight appeals, by the end of 2024, the same Shevchenkivskyi District Court lifted the seizure of 47% of the corporate rights of "Kyivstar".

Throughout this time, the situation regarding the potential nationalization of the operator worried Veon investors. "The question of seizing a certain share of