Russian Internet company Yandex ( NASDAQ: YNDX )shares surged to $ 61, way above its offering price of $ 25 per shares offering more than 100 % upside, but stock gradually come down as investors have booked profits and now just up 33% to $33.37.
| Yandex Inc. |
Yandex's $1.3 billion offering, the biggest U.S. internet listing since Google went public in 2004, comes on the heels of last week's blowout float by networking site LinkedIn amid demand reminiscent of the dot.com boom.
"The LinkedIn share price doubled on the first day of trading," said David Ferguson, an equity analyst at Renaissance Capital in Moscow. "We think the Yandex share price could potentially increase in the first couple of days after the IPO, due to the high oversubscription rate."
Tibor Bokor, at Otkritie brokerage in Moscow, predicted a jump of 25 percent in Yandex shares in the first day of trading, saying investors seeking a bigger position in the name would be ready to pay that premium.
"There is big demand for this kind of stock. It is a sector which will constantly surprise on the upside; expectations built into valuation models are currently below what the company is delivering short-term," Bokor said.
The company is selling 15.4 million new shares and shareholders are selling 36.8 million existing shares, equivalent to 16.2 percent of its enlarged equity of 321.2 million shares.
Lead managers had discussed raising guidance to $26-$27 after the book closed on Monday, a financial market source told Reuters. The price range was increased on Friday to $24-$25 from an initial $20-$22.
Market sources and sources close to the issue said the IPO had been in high demand since the order book opened, but interest spiked after the LinkedIn float.
Stellar Returns
The IPO valued Yandex at $8 billion, or around 500 times the company's worth when a group of private-equity investors led by Baring Vostok Capital Partners bought a 36 percent stake for just over $5 million in 2000.
Unlike social-networking sites like LinkedIn, Yandex's business model, driven by online advertising, has generated strong growth in earnings, which rose by 90 percent to $135 million last year.
Analysts and investors say, however, that the Yandex deal does set a demanding valuation at 18 times 2010 sales compared with Google's multiple of six.
For the company to deliver on its growth proposition it will have to defend its market share in Russian search, now at 65 percent against Google's 22 percent.
Analysts say that the search engine devised by co-founders Arkady Volozh and Ilya Segalovich, regarded as better equipped to handle the grammatical complexities of the Russian language than Google's, will remain a vital competitive advantage.
"Yandex has a proper track record and a business model that investors understand," said Anna Lepetukhina, analyst at Troika Dialog in Moscow.
"It's the same as Google. It's a company that generates cash. And Google in Russia can't become Yandex."
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