Facebook IPO fiasco discourages ‘Russian clone’

Facebook IPO fiasco discourages ‘Russian clone’
While analysts ponder what went wrong with the Facebook IPO, Russia's most popular social network VKontakte has postponed its initial public offering for an indefinite period.

­“The IPO of Facebook destroyed the faith of many private investors in social networks”, the CEO of VKontakte, Pavel Durov, tweeted.

VKontakte, which looks very similar to Facebook and is often accused of being an outright clone, has about 110 million users – doubled from last year. Though Facebook still keeps its position as global leader, Russia as well as some other countries prefer to use their own social networks.

Last June, Reuters reported that VKontakte was in talks with New York investment banks about a potential initial public offering in 2012.

VKontakte went on a share-floating spree following the successful IPO of LinkedIn in March 2011 and that of the leading Russian search engine Yandex in May 2011, which raised $1.3 billion.      

Durov owns 12% in the company, while Mail.ru Group, controlled by Russia’s wealthiest man Alisher Usmanov, owns 39.99%.  Mail.ru said Tuesday it had given Durov the right to vote with its shares, effectively giving him control of the company.

Mail.ru, which had its own $1 billion IPO last year, owned 56.3 million Facebook shares worth $2.14 billion when the shares debuted earlier in May.

However, VKontakte hasn’t solved its piracy problem yet, with its subscribers able to view thousands of pirated copies of domestic and foreign movies, which was expected to be a stumbling block on the way to the planned listing.