Russian Internet company Yandex NV on Monday raised 19 percent more than expected in the sector’s biggest US initial public offering (IPO) since Google Inc went public in 2004.
Russia’s most popular search engine raised US$1.3 billion as investors scooped up the shares, lured by prospects for the country’s growing Internet market and the euphoria of last week’s blowout debut by LinkedIn Corp.
Yandex and its shareholders sold 52.2 million shares for US$25 each, a source briefed on the deal said. They had originally planned to sell the shares at US$20 to US$22 each, but another source close to the issue said Yandex would likely sell shares at US$24 to US$25 each.
Internet companies, especially those with reach into emerging markets, have been stealing the hearts of investors. Yandex, to many analysts, has rekindled memories of an explosive offering by its Chinese equivalent, Baidu Inc (百度).
“Every Internet company that’s come on the market recently wants to be the next Baidu.com ... It really is the ‘Google’ of China,” said Anthony Moro, managing director and head of emerging markets for BNY Mellon’s depositary receipt division.
“Everything else tried to be the ‘Facebook’ of this or the ‘Amazon’ of that, but Yandex really is the ‘Google’ of Russia ... They’re a huge and growing brand,” Moro said.
China’s biggest search engine, rocked US markets with a 354 percent jump in its 2005 NASDAQ debut and has grown into one of the world’s top brands.
Yandex, valued at US$8 billion by its IPO, follows a blockbuster debut by LinkedIn, whose shares more than doubled on the first day of trading and brought back memories of frothy valuations before the dotcom bust a decade ago.
“I don’t know if you’d get such a huge pop [with Yandex] as you did with LinkedIn,” said Darren Fabric, managing director at IPO investment firm IPOX Schuster LLC.
But “it should trade fairly well on its first day even with the market volatility,” Fabric said.
US stocks closed at their lowest levels in a month on Monday, in contrast with the resilience in the market at the time of LinkedIn’s IPO.
LinkedIn is trading at 34 times sales last year, while Google shares are now worth just under six times sales last year. Yandex’s IPO values the shares at 18 times sales last year.
Yandex controls 65 percent of the Russian market for Internet searches, almost three times more than global leader Google. Yandex fans also highlight the company’s record of profitable growth, driven by online advertising: Last year, earnings rose 90 percent to US$135 million on sales that grew by 43 percent to US$445 million.
Investors may be reassured by the fact that the duo who founded Yandex in 1997 — chief executive officer Arkady Volozh and chief technology officer Ilya Segalovich — will retain most of their holdings.
Yandex’s search algorithm, originally developed to conduct keyword searches of patents, Russian classical literature and the Bible, was a breakthrough as it accounted for the Russian language’s complex grammar.
The duo coined the name “Yandex” — with “Ya” standing for the Russian equivalent to English pronoun “I” — as Segalovich was experimenting with derivatives of words that described the essence of the technology. The full name originally stood for “Yet Another iNDEX.”
Yandex shares were to start trading on the NASDAQ yesterday under the symbol “YNDX.”