Yandex: biggest float since Google?

Russia’s biggest internet firm is about to pull off the world’s biggest dot com float since Google, if its target share price is anything to do by. Yandex has raised price guidance to a range of $24 to $25 a share from a previous $20 to $22, Reuters reports. But is this company really Russia’s Google or is it all just market chatter, reminiscent of that surrounding the IPO of Renren, aka China’s Facebook, a few weeks ago? In other words, is this just more froth in the global tech sector?
Yandex raised the price of shares in its Nasdaq IPO on Monday, just hours before the end of book-building and on the heels of hot investor demand for LinkedIn Corp’s IPO last week. The search engine provider is selling 15.4m new shares, as well as 36.8m existing ones, which tallies up to 16.2 per cent of its total 321.2m shares. The new price range values the company at $7.7bn to $8bn.
That means Yandex would debut at 57 times trailing earnings – which looks rich, to say the least. One senior investment manager for a London-based equity fund told beyondbrics last week Russia was one of the cheapest emerging markets with equities trading on average at a 41 per cent discount to EM peers; the trade-off for most investors was between the appeal of growth and concerns over corporate governance.
But while many Russian equities look cheap relative to their peers there are exceptions to the rule – the biggest being the tech sector. The investment manager predicted that Yandex would come to market at 30-40 times earnings – compared to an average of just 9.3 times for the broader Russian market.
True, investors have some reasons to get excited. Yandex was the sixth most-visited search engine in the world (measured by processed queries) to March this year and it has a 65 per cent share of Russia’s internet market. Google, by comparison, has 22 per cent.
Whisperings in the market say the IPO is 5 to 10 times oversubscribed, Reuters reported, citing the head of research at Uralsib.  But investors would do well to remember that Yandex is not entirely comparable to Google or LinkedIn, despite the company’s best efforts to downplay its Russianness.
At the end of the day it’s still a Russian company and even Russian tech companies are not immune to government intervention.  Just two weeks ago Yandex revealed it was forced to give Russia’s federal security service private information about people who used its payment service to donate money to a whistleblowing website