Why Yandex NV Shares Dropped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Yandex NV (NASDAQ: YNDX  )  touched a new 52-week low after falling more than 18% during Friday's intraday trading, then settled to close down around 10% following concerns the European Internet search provider could face pressures from Internet control in Russia.

So what: Specifically -- and keeping in mind that the Russian parliament is considering legislation that could categorize major Internet companies as "strategic" assets -- on Thursday, Russian President Vladimir Putin described the Internet as originally a "special project of the U.S. CIA, and that's how its developing."

He went on to criticize what he views as undue exposure to Western influence for Yandex -- which is Russia's leading search engine -- saying:

As far as Yandex is concerned, not all is so simple. When they too were pressured, told that they had to have so many Americans and so many Europeans in their governing bodies [...] And they had to agree with that. And they are partly registered overseas, not only for tax reasons, but also out of other considerations."

Yandex responded with a news release insisting that, as a publicly traded company with a 70% free float, it is not facing pressure from any of its shareholders. Moreover, Yandex reminded, "It is quite common for any Internet start-up in any country in the world" to have international investors.

Now what: As it stands, while nothing may ultimately come of Putin's suspicions, I still prefer to steer clear given the increasing escalation in the situation between Russia and Ukraine. Personally, the risk of Putin taking action, and potentially forcing foreign investors to sell their stakes or face expropriation, is one that I'd rather not worry about.

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Comments from our Foolish Readers

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  • Report this Comment On April 25, 2014, at 6:12 PM, aaronfraser wrote:

    Bought at 22.10, that's almost like stealing. A double bagger within a year. So profitable, no competition, everything you want in a business in these markets, aside from that pesky Ukraine thing :). Add a little hedging and very little to worry about this business.

  • Report this Comment On April 25, 2014, at 7:23 PM, Gopher2 wrote:

    Wow. This stock went from an undervalued "deal" that simply needed to outlast the Ukraine debacle (2-3 months) and negative sentiment for russian stocks (3-4 months) to an outright roulette investment - excuse the pun!

    I bought shares at 30 - and I am just seeing the worst case scenario; Putin taking control control of YNDX and crushing its market cap.

    Does anyone have some serious ideas about the possibility of Putin doing so?

    It's easy to imagine there are several things about YNDX that Putin doesn't like: YNDX provides alternative information that could undermine his authority and message, and YNDX makes gobs of $$$ for foreign - and US - investors.

    Being that Putin is likely motivated to take over and diminish YNDX, will he really do so? And can he do so?

    As an outsider, it seems like a no brainer that a company that executes as well as YNDX should be left alone. One good sign is that YNDX principals apparently already cooperate with Putin, providing him intelligence. Certainly the principals are not naive rebels, and they have understood the need to play nice with Putin for a long time.

    Maybe Putin was just blowing off some steam yesterday. In reality the comment he made was - to my understanding - an off the cuff reply to a question and not a pre-planned policy statement.

    Do we still stand any chance here? I like the idea of being greedy when others are fearful but I don't like the idea of losing 50% of an investment.

    I pray Putin and YNDX can get together and figure out how to make this a win-win-win situation for he and YNDX and me. I am too stubborn to sell these shares at 24.

    Motley Fool did a MAJOR presentation re: buying YNDX. I would LOVE to see a similar level of analysis now regarding the potential for Putin to ruin this company's market value.

  • Report this Comment On April 26, 2014, at 2:59 AM, FrankoJames wrote:

    Funny, just think what would happen to this stock if Putin founded sputnik.search.

  • Report this Comment On April 26, 2014, at 11:39 AM, giovannimechi wrote:

    buy this dip, I am considering doing it over the next few days.All this noise will soon disappear and a solid company with great prospects will remain.

    In 3-5 years this stock will be a double or a triple.

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