RUSSIA: HEAD OF RUSSIA'S MMM INVESTMENT FIRM STUNS SUPPORTERS BY TELLING THEM THEIR SHARES ARE TEMPORARILY INVALID

Record ID: 646252

  • Title: RUSSIA: HEAD OF RUSSIA'S MMM INVESTMENT FIRM STUNS SUPPORTERS BY TELLING THEM THEIR SHARES ARE TEMPORARILY INVALID
  • Date: 1st November 1994
  • Summary: MOSCOW, RUSSIA (NOVEMBER 1, 1994) 1. GV MMM SIGN, MMM HEADQUARTERS 0.04 2. GV CROWD OUTSIDE MMM OFFICE, SECURITY PREVENTING PEOPLE GETTING TO ENTRANCE, ALLOWING ONLY WORKERS TO GET THROUGH (3 SHOTS) 0.24 3. GV VARIOUS OF ANGRY CROWD, PEOPLE YELLING THAT PRESIDENT OF MMM INVESTMENT FIRM, SERGEI MAVRODI, SHOULD START TRADING AGAIN/ PEOPLE BURNING SHARES (5 SHOTS) 0.56 4. CU SIGN READING 'THIEF' MADE OF MMM SHARES ON SIDE OF BUS 0.59 5. GV CROWDS STANDING BY THE BUS 1.04 6. GV SECURITY GUARDS OUTSIDE THE BUILDING 1.07 7. GV VARIOUS OF CROWD LOOKING AT NOTICEBOARD (3 SHOTS) 1.21 Initials Script is copyright Reuters Limited. All rights reserved.
  • Embargoed: 16th November 1994 12:00
  • Keywords:
  • Location: MOSCOW, RUSSIA
  • City:
  • Country: Russia
  • Reuters ID: LVABL15MDR9FB0UMEOTOTR2HS5J3
  • Story Text: The flamboyant head of Russia's MMM investment firm stunned his supporters on Tuesday (November 1) by telling them their shares were temporarily invalid in a move that seemed certain to shatter his reputation as a people's hero.

    About 3,000 people had massed at MMM's main offices in southern Moscow to buy new shares or sell back their old ones after company president Sergei Mavrodi's victory in parliamentary elections on Monday.

    But a general mood of expectation and elation changed to anger when a company employee read out a statement by Mavrodi in which he said the validity of old shares would be suspended from November 1 to January 1.

    Mavrodi, who may have won immunity from prosecution on tax evasion charges because his by-election victory, said in his statement that the validity of old shares had been temporarily suspended "because of their concentration in the hands of speculators and middlemen".

    The memo blamed what it said were his incompetent colleagues for failing to organise things properly during his absence. It said that new shares would be produced and new rates announced every Tuesday and Thursday. He hoped that by January the rate would be 13,000 roubles (3.9 U.S. dollars) per share.

    Although most people reacted with fury and disappointment at the statement, others waited to buy new shares in the company at 1,000 roubles (0.30 United States dollars) each.

    The MMM firm collapsed during the summer leaving tens of thousands of investors holding virtually worthless paper.

    The initial phenomenal success of MMM's pyramid share sales, followed by the drama of Mavrodi's arrest, made him a national hero in Russia, where many blamed the government for causing the collapse in MMM shares and victimising its head.


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