Mail.ru IPO to Give Mortals a Stake in Facebook, Zynga

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Mail.ru, the Russian holding company formerly known as Digital Sky Technologies which owns stakes in tech superstars Zynga and Facebook, has filed for an initial stock offering on the London Stock Exchange. The offering could give the entity a market value as high as $6 billion, and is expected to close within the next few months. The IPO will give investors their first chance at owning a partial stake in online superstars such as Facebook and social-game maker Zynga. The holding company also owns the instant messaging service ICQ and Mail.ru, which is the largest Internet portal in Russia.

Mail.ru announced its intention to file for a public offering of up to 15 percent of its shares earlier this month in a notice filed with the London Stock Exchange, which said the company is “well positioned to benefit from the expected growth of the Russian Internet advertising market and the increase in Internet Value Added Services.” Mail.ru’s various sites reach about 70 per cent of Russian Internet users on a monthly basis, and the company is the seventh-largest Internet business in the world, based on page views.

The company, which renamed itself earlier this year, owns two of the three largest Russian-language online social networking sites (Odnoklassniki and Moi Mir, or “My World”), as well as the two largest instant messaging networks in Russia (Agent and ICQ), the second-largest portal (Mail.ru) and a minority stake in vKontakte, Russia’s largest social-networking site (it said it plans to use the proceeds of the offering to boost its stake in the latter). It also owns a minority stake in Qiwi, a leading Russian payment-processing company. Russian billionaire Alisher Usmanov is a major shareholder of Mail.ru, along with South African Internet company Naspers, which owns almost 30 percent.

The company is clearly a Russian powerhouse, but the holdings that matter most to Western investors are its stake in Facebook (2.38 percent), Zynga (1.47 percent) and Groupon (5.13 percent). Mail.ru’s IPO “is the only way to get exposure to Facebook, so it might attract a broad range of investors,” Michael Kart of Moscow-based investment firm Marshall Spectrum Ltd. told the Bloomberg news wire. “This is a sector which is not available on the market, which means the placement will probably be at a premium to western firms like Google and Yahoo.”

Investors can buy secondary shares in private companies like Facebook and Zynga through services such as SecondMarket, but Mail.ru will be the first opportunity to buy publicly-traded shares that have some connection with those companies, as the market waits with bated breath breath for a much-anticipated Facebook initial offering.

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Post and thumbnail photos courtesy of Flickr user Melissa Gray

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