Yandex's surge stirs talk of tech bubble

Shares of Yandex, a Russian search engine barely known in the US, surged by more than 55 per cent on Tuesday, signifying the latest multibillion-dollar technology offering and stoking the debate about whether this market has the makings of a bubble.

The debut of Yandex defied already lofty expectations, coming on the heels of the initial public offering of LinkedIn, the professional networking site whose shares more than doubled on their first day of trading.

The Russian company, whose shares were priced as much as 25 per cent higher than earlier estimates, raised $1.3 billion, the largest Internet offering in the US since Google went public in 2004. The stock closed at $38.84 on Tuesday, up from $25 at its IPO.

“Yandex serves as yet another data point that we are at the start of a growth cycle for IPOs,” said Paul Bard, the director of research for the IPO advisory firm Renaissance Capital. “Overall, investors have been starved for innovative, rapidly growing enterprises in new industries.”

But the strong demand — even fervour — for technology offerings is once again fanning concerns about market froth. In recent weeks, a number of multibillion-dollar Internet companies have enjoyed robust first-day pops like Yandex and LinkedIn, drawing unfavourable comparisons to the ill-fated dot-com boom.

Renren, called the Facebook of China, jumped 29 per cent after its IPO in early May. LinkedIn, which had recently traded in the secondary markets at an implied valuation of $2.5 billion, is now worth more than $8 billion.

As befitting a technology startup, Yandex had scrappy beginnings. A Russian mathematician, Arkady Volozh, and geophysicist, Ilya Segalovich, founded the company in 1997, using an algorithm they invented to scan the Cyrillic scrip of the Russian Bible and classical literature.

The country’s programmers have traditionally excelled at mathematically complex tasks like those involved in searches, tapping a rich tradition of scientific education in the Soviet Union.

The Yandex offering underscores the appeal of companies with a strong claim to a rapidly expanding sector — Internet advertising — in emerging economies that are projected to grow more swiftly than those of in the US and Western Europe. Such companies are valued for knowing how to navigate the Web and the delicate politics of their home markets.

Investors have closely watched Yandex, based in Moscow, since the sharp rise in the value of the Chinese search engine Baidu, another regional challenger to Google. Baidu rose 354 per cent on its first day of trading in August 2005, the biggest one-day pop since the dot-com bust, according to Renaissance Capital. Although shares slumped following the IPO, the company now trades at nearly $130, up from its offering price of $27.

Yandex, which caters to the world’s roughly 270 million Russian speakers, generates more searches in Russia than Google. 

©2011 The New York
Times News Service