Why do Russian companies go public in London?

Reports from Russia suggest that MegaFon, the country’s second-largest mobile operator, is preparing to go public — on the London exchange.
Bloomberg is reporting that the business, which has 62 million subscribers, is planning to bring in banks and will try to raise around $4 billion from the IPO.
Meanwhile local newspaper Vedomosti added more detail, saying that the flotation will take place in the U.K. in July.
It’s a significant move for the company, which is owned mainly by Swedish telecom firm TeliaSonera and billionaire Alisher Usmanov — and for the Russian tech and communications market.
But there’s another question: why is London so popular for Russian IPOs?
Not every European startup chooses to float in London — in fact, many go to New York. And nor does every Russian business go there, either: Yandex (s YNDX), the Moscow-based search engine and rival to Google (s GOOG), chose to hit the Nasdaq.
But there are dozens of Russian companies on the London exchange — far more than on the other side of the Atlantic, and the biggest example in tech is probably Mail.ru (s MAIL), which hit the market a year and a half ago and indirectly helped drive Silicon Valley on again through its links to Facebook, Twitter and others.
So what are some of the reasons for Russian businesses to go to London?
Geography: The British capital is one of the world’s leading financial centers, and really the closest one to Moscow. The cultural ties are also strong, as Russian oligarchs have long coveted assets in London, including real estate, businesses and the occasional sports club.
Peer group: Many Russian companies have chosen to list in London over the years because that’s where their peers — gas or oil companies, for example — are. That, in turn, has built up a corpus of Russian businesses on the London exchange that makes it more appealing to newcomers (and increases the amount of expertise in making those floats work). As industries gain gravity, they draw the next generation in their wake.
Foreign rules: Although foreign companies can list on NASDAQ, it is not a popular place for businesses based outside the U.S — and the Dow Jones index doesn’t include foreign-headquartered companies at all. The rules in London are less strict than elsewhere, with many companies using a loophole that allows them to set up an office in London to list a minimal amount of shares, while retaining control in their home countries. All this makes London a much more internationally-minded market.
Access to capital: That international mindset plays makes London more sympathetic to Russian companies than perhaps other places. Combined with the high oil price that has helped Moscow’s economy, and privatization of state-owned assets being pushed by the government, that makes things pretty lucrative.

Not all good news

But the love affair could be coming to an end. Over the past year there have been several significant pullouts by firms heading from Moscow to the U.K., and the London markets now seem to have less patience with Russian businesses than they once did.
We’ve been here before, when the chatter was all about Russian companies ditching London for Asia. But it does mean that MegaFon’s mooted listing will be interesting, because it could be an important move to glue two major European capitals together — or, if the company ends up going elsewhere, could rend them asunder.