Investors rush back to Russian YUKOS despite risks

Five months after Kremlin intrigues sank Russia's biggest merger and with it investor confidence in the wider local market, share buyers are back in YUKOS, seemingly as if nothing ever happened.
The arrest of the oil major's Chief Executive Mikhail Khodorkovsky and the collapse of its agreement to take over smaller rival Sibneft sent investors scurrying last year.
The main share index, in which YUKOS makes up nearly a fifth by capitalisation, dropped by 28 percent.
But YUKOS shares hit $15.61 this week, near all-time highs and 60 percent up on record lows late last year. On Wednesday they were trading around $14.40.
"There is high liquidity, a lot of money and a blunted sense of risk," said Ivan Mazalov, who manages $600 million at Prosperity Capital Management. "Nothing has actually changed except investors' interpretations."
The affair has only got more complicated since news first broke of Khodorkovsky's arrest and first doubts about the merger subsequently emerged.
Key YUKOS shareholders have either been jailed or have fled Russia. The firm itself faces a $3 billion back-tax bill and analysts believe Khodorkovsky and other core YUKOS owners might have their shares confiscated by the Russian courts.
But investors are flooding back and the oil-heavy RTS share index is hitting record highs almost daily.
"Big international players are betting that YUKOS's troubles are over, which seems to us to be unjustified," said Alex Kantarovich, chief strategist at brokerage Aton.
"YUKOS can be valued at anywhere between $8 and $19 (a share). The risks are very, very high and the possible outcome is difficult to predict. We're in the fog."
YUKOS has yet to reverse the Sibneft merger. Core shareholders appear to be prepared to undo the deal but YUKOS management are continuing to try and complete the take-over in the absence of a clear demerger process.
The firms spent much of last year merging operations to create a combine that would have created the world's sixth largest oil firm by oil and gas output.
But the merger collapsed on the brink of completion after police seized Khodorkovsky, YUKOS's politically ambitious chief, on fraud and tax evasion charges.
Despite YUKOS owning 92 percent of its shares, Sibneft's management has remained loyal to former owners headed by Chelsea football club chief Roman Abramovich and repeatedly blocked attempts by YUKOS's management to assert control.
"There clearly is no plan. The merger was a...six-month-long transaction," said Elena Krasnitskaya of Troika Dialog. "Demerger looks set to be even more complicated."
On Wednesday YUKOS Chief Executive Simon Kukes underlined the sense of uncertainty in an open letter, published as a full page advertisement in the Financial Times newspaper.
"No proposal to sell the Sibneft shares owned by YUKOS (back) to the former Sibneft principal shareholders has been presented to the Company," he wrote.
"This causes uncertainty and is damaging the interests of the company, its employees and all other stakeholders, including every single shareholder."
In the end, the battle may be fought out in the courts.
Sibneft's former owners last month persuaded a judge to annul an issue of YUKOS shares representing 17.2 percent of the company in exchange for 57.5 percent of Sibneft. That represents the bulk of the merger deal, and could pave the way for judges to roll back more of it.
"The court ruling (is) the shortest, least painful way for a demerger," Krasnitskaya said. "The...decision is a very good way out of a legal quandary".