Ozon, Russia’s leading multi-category e-commerce company, aims to go public later this year or in early 2021, the company announced Friday, and has started the registration procedure for an initial public offering (IPO) with the US Securities and Exchange Commission (SEC).
The company did not provide any details on the potential placement but, according to sources quoted by The Wall Street Journal, it could be valued between $3 billion and $5 billion.
In 2019, Ozon’s gross merchandise value (GMV)1 amounted to 80.5 billion rubles ($1.25 billion at the average exchange rate of the year), up 93% from 2018. Growth has been accelerating this year, with GMV surging 188% year-on-year in Q2 2020, or 152% during the first half of this year.
“In addition to the vast room for structural growth in a market that has seen relatively low penetration and high fragmentation, Russian online retailers received an additional boost from the lockdown environment on the back of the Covid-19 outbreak this year” – and this effect could be long-lasting, believe Oksana Mustiatsa and Mikhail Terentiev, market analysts at Sova Capital.
“We think that Ozon, being the second largest multi-category e-retailer in Russia, is well positioned to benefit from these trends due to its rapid marketplace development (already over 50% in GMV reached in June) and the expansion of its logistics and fulfillment capabilities,” they told East-West Digital News.
In total, according to market research agency Data Insight, online sales of physical goods in Russia could expand to 2.5 trillion rubles this year ($32 billion at the current exchange rate) and potentially reach some 7 trillion rubles (nearly $90 billion) by 2024.
On the footsteps of Amazon
Founded back in 1998 as an analog of Amazon – at that time, an online seller of books and CDs – Ozon progressively enlarged its assortment. Over the years, Ozon’s growth required considerable investments – in particular, to develop one of the largest warehousing and logistic networks in Russia.
Ozon thus became the most well-funded independent e-commerce company in Russia, securing five funding rounds in the past ten years:
- $100 million in 2011;
- $150 million in 2014;
- $92 million in 2018;
- $154 million in May 2019;
- $150 million in March 2020.
The latest round involved existing investors Baring Vostok Capital Partners – whose founder US citizen Michael Calvey has been under arrest in Moscow since early 2019 – and Sistema’s corporate fund, as well as Princeville Capital, a new investor.
This US VC firm brought one third of the funding, marking the first significant involvement of a US investor in the Russian digital space since 2013.
Earlier this year Ozon reportedly discussed with Sber, the state-controlled financial and technological giant, yet another investment deal. The talks seems to have stalled, however, as reported by Reuters – which might have triggered Ozon to accelerate its IPO plans.
Online video leader in the running
Another Russian digital major, ivi.ru, is also eyeing a Western IPO, according to numerous media reports over the past two years. The company did not make official statements about it yet, but two unnamed bankers confirmed to Reuters last week that ivi was considering going public in the short term.
Russia’s largest video streaming platform in terms of revenue, ivi.ru generated last year 6.1 billion rubles ($95 million) in revenues, VAT excluded, up 55% from 2018. The average monthly audience of the service grew by 14%, exceeding 50 million unique users as of late 2019. The total viewing time for the year amounted to 1 billion hours, including 400 million hours accounting for a paying audience, according to the company.
Ivi.ru could be valued at more than $700 million, according to analysts who talked with the Russian media in early 2020.
The Russian online video market is usually valued at around $300 million for 2019. The main players are domestic platforms ivi, Okko, Amediateka alongside foreign players YouTube, iTunes and Google Play. At the beginning, the business model of Russian online video platform relied primarily on advertising revenues. However, user-generated revenues now exceed advertising revenues.
Russian IPOs on Western exchanges
Despite the unfavorable geopolitical context, several Russian digital companies raised substantial amounts on Western exchanges in the past years — or are considering doing so in the future.
The latest cases include HR platform hh.ru, which went public on the NASDAQ in June 2019; Yandex, which raised there $460 million in June 2020; and Mail.ru Group, which is about to raise $600 million on the London Stock Exchange.
Yandex.Taxi, the promising ride-hailing company of Yandex and Uber, was actively preparing its IPO last year. The listing, initially scheduled for 2020, has however been postponed due to market conditions surrounding the coronavirus pandemic.
(1) GMV is the total value of orders processed through Ozon and revenue from services to buyers and sellers on the platform, excluding Ozon Travel. GMV is inclusive of VAT, net of discounts, returns and cancellations.
