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Yandex shares skyrocket on first trading day

Yandex founder and CEO Arkady Volozh (front, 2nd R) celebrates as Yandex is listed on the Nasdaq exchange during their IPO at the Nasdaq market site in New York May 24, 2011.

Another Internet stock has debuted to rave reviews in the U.S. stock market, as Wall Street demonstrated for the second time in less than a week that it has developed a ravenous appetite for dot-com IPOs.

Yandex N.V. , a Dutch-based provider of Russia's dominant Internet search engine, surged 55 per cent in its first day of trading on the Nasdaq Stock Market Tuesday, closing at $38.84 (U.S.) compared with its initial public offering price of $25.

The timing of Yandex's IPO - which had been planned weeks ago - was fortuitous, coming just days after the wildly successful IPO of professional-networking site LinkedIn Corp. LinkedIn's stock more than doubled in a frenzied first day of trading on the New York Stock Exchange last week, awakening Wall Street's hunger for more Internet share offerings.

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"The market appetite is insane. Everybody wants exposure to this [market segment]" said Bill Buhr, IPO strategist at investment research firm Morningstar Inc.

Yandex had indicated two weeks ago that it expected to price the IPO at $20 to $22 a share, but as investor interest surged in the wake of LinkedIn's success, Yandex raised the range to $24 to $25 - eventually pricing the 52-million-share offering at the top end of that range. The issue was reportedly 17-times oversubscribed, a level of demand that drove the price sharply higher when public trading began Tuesday morning. The stock spiked as high as $42 in its first minute of trading. More than 70 million shares changed hands during the session, making it the third-most-actively traded stock in the U.S. market.

Analysts believe the frenzy over first LinkedIn and now Yandex is signalling that investors are eager to get a piece of the latest generation of Internet businesses - which could encourage other eagerly awaited names in the sector such as Facebook Inc., Twitter Inc., Groupon Inc. and Zynga Inc. to launch their own IPOs sooner than previously expected.

"Investors are interested in fast-growing Internet companies," said Stephanie Chang, analyst at IPO specialist Renaissance Capital LLC in Greenwich, Conn. "It will probably inspire other companies to go public."

Yandex is often called "the Google of Russia," because of its massive presence in the world's ninth-most populous country. Yandex holds down a 65-per-cent share of all Russian Internet searches, compared with Google's 22 per cent.

Google has been operating a Russian-language search engine for a decade and set up shop in Russia five years ago, yet it hasn't come close to breaking Yandex's stranglehold on the Russian market.

"They have defended their turf. Google has come in, and they've beaten Google. That's big," Mr. Buhr said.

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Ms. Chang noted that Yandex's technology has a unique capability to understand the quirks of the Russian language - giving its search engine a big advantage over Google in Russia.

And like LinkedIn, Yandex is also profitable - it had profit of $134-million on revenues of $440-million in 2010, according to the company's IPO documents filed with the U.S. Securities and Exchange Commission.

Still, Mr. Buhr warned, the initial frenzy looks to have pushed the prices of Yandex and LinkedIn beyond reason.

"We still aren't huge believers in the prices of these," he said. "As new deals [for other big Internet names]come out and the excitement dies down, these could be in for a pullback."

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More

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