Yandex has found a way to divide its digital empire. Who will hold sway over this sprawling platform?
As the second year of Ukraine's full-scale invasion unfolded, Yandex reached a pivotal agreement, splitting its operations between Russia and the international arena. Here, I delve into the details of this deal, unveiling the new hierarchy governing Russia's foremost digital platform.
Founded in 1997, Yandex swiftly rose to prominence as one of Russia's premier privately-owned digital firms. Originating with search services, it soon diversified into realms such as ride-hailing, food delivery, and streaming, solidifying its position as a market leader. With a net profit of approximately 48 billion RUB (£672 million) in 2022, it ranked 31st among Russia's corporate giants.
Prior to 2022, the corporate ownership structure maintained a level of transparency. Yandex N.V., headquartered in the Netherlands, exercised control over LLC Yandex, the operational entity situated in Russia. The shareholder configuration of Yandex N.V. with voting rights encompassed a family trust associated with Arkadiy Volozh, the company's founder (approximately 45%), personnel and board members (approximately 7%), miscellaneous stakeholders (approximately 2%), and free float (approximately 46%). A solitary golden share rested in the possession of the Public Interest Foundation (PIF)—established as a safeguard against foreign acquisitions that could potentially impede efforts to aggregate more than 10 percent of the company's shares. This control mechanism emerged from a negotiated agreement with the government, which harboured apprehensions regarding the prospective transfer of control over the digital platform to foreign entities. Members the PIF include prominent Russian scientists and company managers, although the full list of members is not disclosed.
Per the terms of the recent agreement, control over Yandex's Russian operations will transfer to the newly incorporated International Joint Stock Company “Yandex” (Mezhdunarodnaya kompaniya akcionernoe obschestvo (MKAO) «Yandeks»), domiciled in Russia. The primary shareholder of the newly incorporated ISJC will be the closed-end investment fund “Consortium.First” (zakrytyj paevyj investicionnyj fond (ZPIF) «Konsorcium.Pervyj»), whose stakeholders include:
FMP LLC—comprising up to 50 Yandex executives, holding 35% of the equity of the Fund;
LUKOIL, via the mutual fund "Argonaut"—holding 15%;
Alexander Chachava, a venture fund founder, and IT entrepreneur, through "Infinity Management"—holding 25%;
Pavel Prass, beneficiary of multiple IT enterprises, through "IT.Elaboration"—holding 15%;
Alexander Ryazanov, former Gazprom deputy chair, via "Meridian-Service"—holding 10%.
Observers note that none of the mutual fund participants have made such large-scale investment before, raising concerns that they are not the ‘real’ Yandex buyers. The closed-end nature of the investment fund affords participant confidentiality. This will allow the named shareholders to sell their stakes to other market participants after the end of the annual lock-up period, while the transaction itself will remain secret from the public. Notably, the fund can nominate six of the ISJC «Yandeks»'s ten board members.
Additionally, two board seats will be allocated to the Managers Fund — a new entity safeguarding managerial influence over critical decisions via veto rights on pivotal matters such as budget approval and charter amendments. The Fund's composition remains undisclosed, mirroring the opacity of the Public Interests Fund, which will persist in its current guise— the golden share in Yandex N.V. will be transformed into a golden share in new IJSC “Yandex.” Thus, there will be two golden shares in the new ISJC «Yandeks» — one at the disposal of the company's managers and the other in the hands of the PIF.
In exchange for its LLC Yandex stake, the Dutch entity will receive RUB 475 billion in shares and cash. Post-transaction, the newly detached Yandex N.V. will rebrand, focusing on its remaining ventures—Nebius (a leading European provider of GPU capacity via an AI cloud platform), Toloka (a data solutions partner for GenAI and Large Language Model development), and other products. For 5 years the company will not be allowed to develop services competing with Russian Yandex.
While Yandex's management asserts the preservation of its core tenets—private-public status, autonomy, and creative ethos—the updated entity's governance veers towards opaqueness, stirring concerns over transparency.
