Russian social networking site VK has announced that its board of directors (BoD) has approved the possibility of re-domiciliation from the British Virgin Islands to Russia, the company reported on February 13.

The move is subject to the company meeting all relevant legal and regulatory requirements. If the re-domiciliation goes ahead, VK will become an International Public Company under Russian law. It is expected to improve the company’s operational efficiency, although there are no details as yet regarding the timing or mechanics of the process, Renaissance Capital reported in a note.

The potential move should benefit local investors due to the reduced risks associated with a foreign domicile in the current geopolitical environment. It may also enable VK to distribute cash, which is not unrealistic given recent asset sales that have reduced leverage and improved cash generation, Rencap said.

“It is unclear what options will be given to international shareholders, including those who cannot hold local stock. However, management is likely to be incentivised to enable conversion for all investors should the re-domiciliation and local listing take place,” Rencap added.

Overall, the potential re-domiciliation, combined with an increase in management’s economic interest and the stock’s undemanding valuation, increases the chances of VK shares’ re-rating in the near to medium term. On current estimates, VK trades on 3.7x EV/EBITDA 2023, Rencap reports.