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Summary:

Shares in Russian Internet group Mail.ru have fallen to their lowest point since the company went public last year. But since the company has been indirectly fueling Silicon Valley’s latest investment boom, a serious slump could have repercussions far beyond Moscow.

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It took almost a year, but is reality finally setting in for Russian Internet group Mail.ru, one of the companies that has been secretly fueling the recent Silicon Valley boom?

Mail.ru shares have been one of the hot technology stocks of the past year, but this week — with the world’s financial markets still struggling to keep their heads above water — its price has dipped below launch levels for the first time. As the bell rang to close trading on the London Stock Exchange today, shares stood at $24.75, down 14 percent on the day, and down more than 10 percent from launch.

It’s a dramatic turnaround from a few months ago. When the company hit the London Stock Exchange for the first time last November, there was a frenzy of activity around it. Technology IPOs were thin on the ground, which led to increased appetite among buyers. In the end, shares were 20 times over-subscribed, and the price immediately rocketed by 41 percent over the low launch estimates, hitting almost a billion dollars and valuing the company at more than $7 billion overall.

Today the company hasn’t just gone back to where it started, but worse.

So what happened? What are we seeing here?

The first thing to remember is that the markets in general are struggling. The FTSE closed down 3 percent for the day, and has been subjected to a torrid few weeks as panic spreads about the future of the Euro.

It’s also worth pointing out that Mail.ru’s shares have not been the most solid performers since the business went public. By January, they’d reached $44, but by April they were threatening to drop below pre-launch levels — before stabilizing and settling in the $33-$37 range. So this rise and fall isn’t entirely unexpected.

But there are still unanswered questions about the reasons behind this particular wobble, and not least because the drop comes just a couple of weeks after company chairman and Silicon Valley investor Yuri Milner cashed out more than $60 million.

At the same time, there appears to be a broader trend worth noticing.

Two weeks ago, Yandex, another major Russian technology company which launched on the markets in the past year, saw similar falls. So is this a particular reaction to companies from Moscow? Is it a market reaction to growing concern about Russian politics? That would only be exacerbated by Vladimir Putin’s statement that he wants to see a Eurasian Union of former Soviet nations — but if that were a serious problem, other Russian companies would also have seen similar drops (which they haven’t).

One thing is certain: if Mail.ru doesn’t reverse its slide, this slump could have serious repercussions elsewhere.

The company is one of the most important cogs in a financial system that has helped push up the valuations of many major web companies and poured oil on the fire of investment and fundraising.

Chairman Milner — deemed “the oligarch of geeks” by Michael Wolff — has almost single-handedly pushed up a number of valuations by investing heavily at high prices. He’s the man who is now offering $150,000 to every startup that graduates from the Y Combinator accelerator program.

And, as I’ve detailed in the past, it also has money in several major Silicon Valley startups, with heavy investments in Facebook and Zynga, as well as Groupon. Pushing money into those companies has been a very important part of the most recent social web funding boom — and it also means any pain Mail.ru is going through could end up proving very significant elsewhere.

One to watch.

  1. I don’t know if I’d want to business when Putin takes over as President next year.

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