Putin has broken Russia’s brightest tech business-founder Arkady Volozh, who lost $2 billion in three months

Arkady Vozh is the tech entrepreneur behind Yandex, which is Russia’s equivalent to Google and Yahoo. His stake in Russia’s largest tech company has seen its value drop by more than 60% since Thursday, when Putin attacked Ukraine. As Russia’s business community was reeling from Putin’s war, Volozh lost over $400 million. Forbes estimates that Volozh’s net worth reached a peak of $2.6 billion and is now worth $580million.

Russia’s tech stocks are a small group of online businesses that have not been targeted by sanctions. They have been especially vulnerable to the uncertainty in Russia and have paid a heavy price for this geopolitical chaos. The New York Stock Exchange and Nasdaq stopped trading in Yandex on Monday. This included Nexters video game maker (down 20% in February), HeadHunter Group online recruitment company (down 68% February), Ozon Holdings e-commerce platform (down 46% February) and Qiwi payment startup (down 25% February).

Volozh, a coder and tech entrepreneur from Silicon Valley tradition was the founder of several IT companies before he founded Yandex in 1997. Yandex, which means “Yet Another Index” in Russian, was Russia’s largest tech business. It is listed on NASDAQ and headquartered in Moscow. Its market cap Wednesday stands at $6.7 billion.

Yandex was more important to Russia than the dollar value it had for years. Yandex was a popular choice for Russian investors and users. It gained a 60% share of Russia’s search engine market, a sign that Russian tech entrepreneurs could compete with its U.S. counterparts. A rapidly expanding Uber-like ride-hailing business was also part of Yandex.

Sebastian Patulea (Vice President of Equity Research at Jefferies, London) confirms that Yandex’s financials are not sufficient to justify the sell-off. Last week’s rapid decline is, unsurprisingly, due to new “geopolitical risks” and larger “indirect consequences” of the punitive sanctions against Russia. The future remains uncertain. “[T]he company’s fundamental value will change as its growth rate, cost of capital, and FX rate (which the company reports in Russian but trades in USD), will all decrease,” he said. “In a flywheel effect – the sentiment factor,” the general burden from bad news in Russia “may increase the downside risk.”

Ildar Davletshin is a senior Wood & Co research analyst. He sees four main issues facing Yandex. These are the impact of Russia’s collapse on its core digital advertising business and ride hailing; restrictions on high-tech equipment supply, including chips; and the possible shortage of capital to finance its growth projects such as self-driving cars or cloud technology. He says that the company won’t have enough capital to finance (these ventures) if the geopolitical environment does not change. Davletshin also says that Yandex is not subject to sanctions but its shareholders include sanctioned entities such as the Russian bank VTB.

There are also concerns about Yandex’s influence by the Kremlin. The Guardian reported that Yandex had agreed to a restructuring in 2019 which gave a “golden part” to a newly created Public Interest Foundation, designed to “defend the nation’s interests.” Yandex was involved in a dispute last September with the government as part of the State Duma elections. Yandex was put in a difficult position by the Russian Federation when it claimed that it owned the search term “Smart Voting” and was therefore in dispute with the government.

Bill Browder, a prominent Putin critic and ex-hedge fund financier, predicted in September that Russian entrepreneurs would soon be faced with an “ugly Faustian deal.” He told Forbes that tech companies like Yandex would have to balance “doing businesses” with “the bidding [of] a dictator,” adding: “It’s just as grim in Silicon Valley.”

Billionaires fall off

Volozh is but he’s not the only billionaire who has fallen off the Forbes list since Russia invaded Ukraine. Forbes‘ real-time billionaire tracker shows that at least 10 Russian billionaires fell below the $1 billion threshold within a matter of days.

Most notable of all, Oleg Tinkov saw shares in Tinkoff (listed at the London Stock Exchange), drop more than 90% since Russia’s invasion of Ukraine. Tinkov’s fortune shrank by $5 billion in less that a month. On Tuesday, he joined Volozh in losing the status of a billionaire.

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