Page 12 - RusRPTNov19

strongly pushing the government to support Anton Gorelkin’s Duma bill to limit foreign ownership in large IT companies.
Gorelkin’s bill, introduced to the Duma in July and discussed in the first week of October, calls for limiting foreign ownership in companies critical to Russia’s internet infrastructure to 20%. This legislation would threaten nearly all of Russia’s largest IT companies. Yandex’s parent company is based in the Netherlands, and roughly 85% of its shares are floated on the NASDAQ. Similarly, Mail.ru Group is registered in the British Virgin Islands, and 50% its shares are sold on the London Stock Exchange.
What does the legislation entail for these companies? If they do not comply with the foreign ownership limit, the companies will be prohibited from advertising within Russia, and only 20% of their foreign shareholders will be able to vote in company matters.
Even if the legislation is not passed—it hasn’t undergone a first reading yet—investors fear the political uncertainty will hurt Yandex’s attempts to hold an IPO for Yandex.Taxi and to further develop Yandex.Market independent of its JV with Sberbank.
All told, Yandex lost roughly $1.5bn in market capitalization on the news. The last time Yandex’s stock dropped so much in a single day was last October, when media reported that Sberbank may become the internet giant’s largest stakeholder.
Recent stories about the government’s desire to improve the investment climate will continue to fall on deaf ears when accompanied by actions of this sort. Yandex is Russia’s preeminent internet company and a favourite of foreign investors in Russia. Seeing that legislation may fundamentally change the market in favour of political interests, foreign investors rightfully sense that their money is not welcome, or safe, in Russia’s most innovative sectors.
12 RUSSIA Country Report November 2019 www.intellinews.o