State Corporation “Dom.The Russian Federation and the government have started working on possible options for its privatization. An initial public offering (IPO) on the Moscow Stock Exchange is expected. It is tentatively scheduled for next year.
It has not yet been decided what share of the company will be privatized, but according to sources of the Vedomosti newspaper, it is a prerequisite that the state retains a controlling stake (more than 50%). One of the options under consideration is the placement of shares in the amount of 36% of the capital (this is the share of the National Welfare Fund, which will be able to get its money back in this way, at least partially).
From the point of view of state interests, the decision to privatize the “House.The Russian Federation” will be counterproductive. Recall that at present it is not just a joint-stock company wholly owned by the state, but a development institute. That is, the meaning of its existence is the fulfillment of state tasks. And making a profit is a secondary goal or, more precisely, even a side goal. The main thing is that government tasks are carried out, and, preferably, as little as possible burdening the federal budget.
If “Home.If the Russian Federation goes on an IPO and it has minority shareholders who are not connected with the state in any way, then profit maximization will inevitably come to the fore. This is an elementary truth — read any economics textbook. This means that the solution of state tasks will cease to be for the “House.The Russian Federation is a priority; considerations of benefit will be taken into account only insofar as they do not contradict profit maximization.
This can be illustrated by an example from the recent past. At the beginning of this year, a lot of noise was made by the story that some banks began to take commissions from developers for issuing preferential mortgages for the purchase of apartments in their houses. This happened after the government reduced the amount of subsidies to banks on preferential mortgages, and they did not want to put up with a reduction in their income and decided to compensate for the lost profits through commissions from developers, who, in turn, began to put these costs into the price of real estate.
It is clear that this practice runs counter to the “state task” of ensuring housing affordability, but, oddly enough, the BEAC was the first to resort to this practice, followed by several other banks, including the state-owned VTB. And only a firm position “Home.The Russian Federation” as a development institution has allowed to stop the spread of this practice.
First, Dom.RF Bank (fully owned by the state corporation Dom.The Russian Federation”), which at that time occupied the fourth place in terms of mortgage issuance, clearly stated that it would not introduce commissions from developers. Then Vitaly Mutko, the head of the state corporation, which is the operator of mortgage subsidy programs, said that “The House.The Russian Federation” can redistribute the limits on preferential mortgages, taking them from banks that imposed a commission on developers, and transferring them to those who did not do so.
This story shows that the state’s ownership of a controlling stake in the company (in this case, Sberbank and VTB) does not mean at all that the company will take into account the interests of the main owner in its activities to the detriment of maximizing profits. But the development institute acted differently: it put the interests of the state at the forefront and this radically changed the situation. If only “Home.The Russian Federation” at that time would have been ordinary However, with shares traded on the stock exchange, he would most likely have followed the example of the largest banks and would also have earned his penny.
So the privatization of the “House.The Russian Federation” will have negative consequences for the effectiveness of state policy in the field of housing construction. In this case, the corporation will simply join the crowd of those who profit from generous government support for the construction industry.
So why is this being done? Why would the state sell a stake in a state corporation, making it less effective from the point of view of its interests? Maybe you have to do this for the sake of the funds that will be received from the placement of shares on the stock exchange? This is probably one of the reasons, because in the recent Presidential Address grandiose plans were announced, the means for which still need to be searched. But, most likely, it’s not just that. Let’s explain our version in more detail.
In the same Message, the president said that the Russian stock market should become a source of investment capital for companies, and set officials the task of doubling its capitalization by 2030. it should reach 66% of GDP (by the end of 2023 – about 33% of GDP). Officials could fulfill the president’s instructions by creating conditions for mass entry into the stock market of new companies, which allowed they should receive funds from investors and invest in development. This is a useful path for the economy, but a long and difficult one.
It is much easier for officials to go other ways. You can, for example, inflate a bubble in the stock market. Let me remind you: in 2006-2007, the capitalization of the Russian stock market exceeded 100% of GDP, that is, it was much higher than the ambitious goal that the president is setting now. However, this does not mean that in those years our stock market was such an effective means of “converting savings into investments.” This only means that then a giant bubble inflated in it (just like in all world markets), which burst with a bang in 2008, and the capitalization of the Russian market plummeted to about 30% of GDP.
And it’s not so difficult to inflate a bubble if you spend a lot of money from the state budget on it — you just need to organize state co—financing of investments and generous tax deductions (and they will be very significant for individual investment accounts of the third type – AIS—3!). If the state support turns out to be significant, then the population will bring money to the market. But if there is no significant volume of new IPOs, then there will be little benefit for the development of the real economy from the funds of the population that came to the stock exchange: they will simply go into speculation and inflating a bubble. But the task set by the president will be fulfilled: the market capitalization will grow!
Another simple way is to bring companies that are now fully owned by the state to the stock market. Since the shares of such companies are not traded on the market, they are not included in the calculation of its capitalization. If even a small share of shares of such a company is brought to the market through an IPO, then they will have a market value, which means that the company will have a clearly defined capitalization, which will be included in the calculation of the market as a whole. Government officials will be able to report on the growth of market capitalization, which is exactly what was required!
That the idea of privatization is “Home.The Russian Federation” through the IPO arose right now — immediately after the president’s Address, suggests that the “surge” of market capitalization could be one of the grounds for this decision, which is counterproductive from the point of view of state interests.
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