Yandex readies Nasdaq IPO (Updated)

Last Thursday, Yandex, Russia’s most popular search engine, filed to launch an IPO on Nasdaq. The fundamentals are pretty insane: Russia is one of the few markets where Google isn’t king. Yandex is Russia’s biggest Internet company by revenue and generated 64 percent of all search traffic last year. According to the Wall Street Journal, its value stands at between $6 billion and $9 billion ahead of the IPO.

But … not so fast. Read the IPO prospectus carefully and the warning signs are there. A new scandal that emerged Monday will likely only raise concerns.

“High-profile businesses in Russia, such as ours, can be particularly vulnerable to politically motivated actions,” Yandex said in the prospectus, according to the Journal. That included potential attacks on its news service (a direct equivalent to Google News). There exists a risk, it said, of “other parties” perceiving its news service “as reflecting a political viewpoint or agenda, which could subject us to politically motivated actions.”

And there’s more: “Well-funded, well-connected financial groups and so-called ‘oligarchs’ have, from time to time, sought to obtain operational control … in attractive businesses in Russia by means that have been perceived as relying on economic or political influence or government connections,” according to the Yandex prospectus. Anyone looking for prior examples need only look at the case of mobile phone shop Yevroset or oil producer Russneft.

Yandex has been accused in the past of trying to curry favor with the government. In late 2009, it shut down its blog ranking service, which regularly saw controversial or anti-government bloggers at the top of the list, prompting bloggers to accuse it of caving in to government pressure.

On Monday, a new scandal engulfed Yandex. Anti-corruption crusader Alexey Navalny uses Yandex Dengi (Yandex Money, a sort of Russian PayPal service) to collect donations for his investigations. Supporters now say that their personal details, given to Yandex Dengi, have been leaked, possibly to Nashi, the pro-Kremlin youth group. They say they’ve been subject to telephone calls asking why they gave money to Navalny. Russian speakers can listen to one such phonecall here. So far, the anti-corruption campaigner has collected 6.2 million rubles ($226,500).

Late Monday, a Yandex official told Echo Moskvy radio that the details were released following a request from the Federal Security Service (FSB).

“Yandex Money got requests from the FSB. These requests related to Navalny’s own account, as well as around 100 people, from some of which Navalny was paid,” said Yelena Kolmanovskaya, Yandex’s chief editor. Yandex was required by law to hand over the information, she said.

“We ourselves are very unhappy with the current situation and share the users’ outrage,” she said. “After our lawyers examine it, we’ll understand what we can do about it.”