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bne December 2019 Companies & Markets I 19
Yandex sets up NGO to hold its golden share, changes governance to reassure government and investors
Ben Aris in Berlin
Russian internet giant and one of Europe’s largest tech companies Yandex has come to an agreement with the Russian authorities to amend its governance and give an NGO with public participation control over its “golden share” with veto powers, in an effort to allay the state’s fears that a “strategically important” technology company will fall under the control of foreign powers.
“In our 22-year history, Yandex has consistently developed world-class services, which today play an important role in the lives of millions of people in Russia, and we continue to develop new ideas that will shape the future of the Russian and global tech sector,” said Arkady Volozh, chief executive officer of Yandex, in a statement.
“We already have one of the only sizeable online taxi businesses in the world that is profitable, and still growing fast. We have some of the best self-driving car technology in the world. And you just have to look at what we are doing with our core search business, our personalised social platform Zen, Cloud and many other businesses to see that the possibilities are endless,” Volozh added.
Investors should welcome the decision as it removes the uncertainty hanging over the stock that it may be nationalised and will squash the rumours that have been circulating in the market.
“Today the company touches the lives of tens of millions of Russians every day. It holds extraordinary amounts of personal user data. It has developed and owned material IP, and other technology. Some call it Russian Google. That’s not right, actually it is Russian Google, Amazon and Spotify all in one. So if something were to happen to Yandex, it wouldn’t just
hit the company, it would hit all of Russian society too,” one investor close to the company said commenting on the deal.
E-commerce in Russia already accounts for 4.5% of total retail turnover and is on course to double that share by 2024. The value of e-commerce in Russia hit $18.2bn in 2018 and is forecast to top $42.8bn by the time President Vladimir Putin
Founder and CEO Arkady Volozh of Russia's top tech company Yandex Arkady Volozh has changed the corporate governance rules to allay both investors' and government concerns.
steps down in 2024. At issue is not just the control over a company, but control over an essential piece of the economy’s commercial infrastructure.
As reported by bne IntelliNews, since its introduction the bill to cap foreign ownership has rocked the shares of Russia's most valuable digital major Yandex in particular, as it is rumoured that the Kremlin aims for more direct control in the company. Draft legislation was introduced to the Duma that would
cap foreign ownership of the New York-listed $11bn market capitalisation company to 20%. More recently the same
law was weakened to set the cap at 49% that would mean
no changes to the current shareholder structure. However, investors have been unsettled by the debate and fear the state may take control of the company.
Volozh told staff on November 18 that Yandex will set up a “Public Interest Foundation” that will get a golden share and have a veto over a defined list of issues such as the sale of material IP, or the sale or transfer of Russian users’ personal data to foreign companies – questions which are deemed to affect Russia’s “national interest”
The non-governmental foundation is modelled on a Dutch stichting, an ownerless special-purpose vehicle often used
to separate ownership from control and protect assets from hostile takeovers. Its board is made up of representatives from five Russian universities, three Russian non-governmental organisations, and three top Yandex executives, the Financial Times reported.
The Russian government is caught on the horns of a dilemma. On the one hand it is keen to see Yandex develop into a world- class company. It is already a European leader in innovation and a major boon for the government’s efforts to digitise the Russian economy. On the other hand, Yandex controls large amounts of personal data on the Russian population that
the authorities are keen to safeguard. Russia has already implemented a set of laws that demand internet companies keep their data on users in Russia where it is subject to Russian law.
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