MMM Slashes Share Value, Buyers Still Bite

The investment fund MMM resumed buying its own shares Friday at less than 1 percent of their previous value and a number of Russians seemed ready to gamble again on the reputed pyramid scheme.


At one MMM office in downtown Moscow, Leonid Operkov, 53, elbowed his way through the crowd, threw up his arms in a victorious gesture and shouted: "I was the first! I bought 200 MMM shares! Let's do it all over again!"


Within five minutes, about 50 people formed a line to once again buy shares in Russia's largest investment company, only a few hours after learning that the securities had fallen in selling value Friday to 950 rubles from 105,600 rubles Monday (to less than 50 cents from about $50) when the company stopped redeeming shares.


In a statement posted outside each of its 60 offices throughout Moscow, MMM President Sergei Mavrodi promised investors that the share price would be back to over 100,000 rubles in just three months. Following its policy of quoting share prices a week in advance, MMM published a list that set the buying rate at 1,430 rubles on Aug. 5.


Despite this week's bursting of the MMM bubble, many believers came forth, purchasing the shares at the buying rate of 1,000 rubles at MMM branches in central Moscow.


"Hope dies last," said Valentina, 55, a teacher who said she held about 30 shares and planned to buy 50 more at the new price. "What can we do? Sell shares at 950 rubles? Are you kidding me?"


"All we can do is wait until the rates go up," said Nikolai, 25, a student who said he had invested 7 million rubles in MMM shares.


MMM officials told 10,000 investors massed outside the company's headquarters in south Moscow that "the shares are in great demand at the reopened offices."


Although some investors criticized MMM, more blamed the government for the huge loss in paper value of the shares.


Russian television reported Friday night that a small group of investors was demanding that the government resign for allowing MMM to devalue its shares so radically. At a cabinet meeting Thursday, the Russian government said it would take steps to better regulate the securities market and urged its agencies to investigate MMM.


MMM's reopening Friday, however, attracted no new response from the Russian authorities.


Deputy Public Prosecutor Oleg Gaidanov told a press conference in the afternoon that no one had yet filed a formal request to launch a criminal investigation against MMM. His statement contradicted an official in the Finance Ministry, who said the ministry had sent a letter Monday asking the Public Prosecutor's Office to charge MMM with issuing illegal securities.


On Friday, some investors, massed at the MMM offices across the city, blamed the company for breaking its promises. "Mavrodi and his gang must be put in jail," said Marina, 61, a pensioner who was in the crowd by the company's headquarters in south Moscow. "They had no right to trick people like that."


MMM offices throughout Moscow have been besieged by panicked investors since the end of last week, when authorities accused one of the company's divisions of failing to pay nearly 50 billion rubles in back taxes and said that some MMM securities were illegal.


The company began attracting droves of investors in January with a massive advertising campaign that featured a typical Russian, Lyonya Golubkov, who grew rich through his investments in MMM.


In February the company started to repurchase its own shares at prices quoted in advance. The shares grew 50-fold in dollar terms through last week.


The company's advertising was so popular and pervasive that Muscovites could even hear the most recent quotation by calling time. On Friday, the Moscow time service continued to list MMM shares at 125,000 rubles.


In his statement, Mavrodi admitted that MMM lacked the cash to redeem its shares at 125,000 rubles, but said that the company had successful investments that would help it overcome the crisis.