Shares of Yandex N.V. (NASDAQ:YNDX) dropped 17.8% on Thursday following reports that Russia's state-owned Sberbank may take a controlling stake in the country's leading internet search company.
More specifically, according to sources speaking to The Bell, Sberbank management is in talks to acquire as much as 30% of Yandex -- a stake that would have been worth roughly $3.5 billion before today's decline -- arguing that its ownership would "protect the company from potential problems from both competitors and the state."
The Bell cautioned that the two parties haven't settled on a framework for the potential deal, but added "various options are being discussed -- from a new share issue and share buy-back in the open market to the sale of some of Yandex's primary shareholders' stakes."
So why the decline? Perhaps some investors are concerned over the possibility that Sberbank's stake could mean potential dilution for existing shareholders -- though a share issuance and subsequent buyback would be presumably a zero-sum game. Alternatively, you can't help but wonder whether Yandex's autonomy could suffer with a government-owned bank as its controlling stakeholder.
It also didn't help that -- coupled with the fact that Yandex stock had climbed nearly 13% on little material news over the past 1 1/2 weeks -- the broader stock market suffered its own steep declines today, likely amplifying Yandex's fall.
Yandex declined to comment on the report, while Sberbank representatives simply denied that the bank has made an offer. But it's worth noting that Yandex and Sberbank have a long history of collaboration. Most recently, that history grew to include the formation of the former's Yandex.Market joint venture this past April in which both companies invested an equal $500 million stake.
In any case, this deal is hardly guaranteed, and even then, it's unclear how or why it would be a bad thing for Yandex. In the end, I wouldn't place much credence in the report until we receive more concrete details.