In the instable environment created by Russia’s war on Ukraine, Yandex’s annual report to the US Security Exchange Commission (SEC) provides details on a range of pressing business issues and potential company risks. The report was issued Thursday by Yandex’s Netherlands-headquartered mother company, which has been listed on the Nasdaq since 2011.
After the resignation of one of its top executive in March — Tigran Khudaverdyan, who was designated under EU and UK sanctions, — “none of Yandex or our group companies, nor any of our current directors or senior management,” is now targeted by western sanctions, says the report.
Yandex concedes, however, its indirect exposure to sanctions: “We are indirectly impacted by the designation of numerous parties in Russia and the restrictions that this places on international businesses in Russia. In addition, the US, EU and other governments have imposed strict controls on export of certain technology – including both hardware and software – to Russia or to certain Russian parties. A number of international businesses are taking a conservative approach and are restricting or eliminating their business with and supply to any parties in Russia at this time.”
Investments suspended
“These developments have adversely impacted (and may in the future materially adversely impact) the macroeconomic climate in Russia which, in turn, “could have a material adverse effect on our financial position and results of operations,” Yandex’s SEC report reads.
More specifically, Yandex expects its advertising business to be “affected in the near term by the withdrawal of multinational advertisers from the market and tighter advertising budgets for domestic businesses.”
Yandex also “anticipates” a potential decrease in consumer spending in Russia, in addition to international supply chain disruptions. This could affect its e-commerce activities, the company says cautiously, even though this year’s prospects for Russian e-commerce do not look so gloomy according to recent independent research.
Due to these uncertainties, Yandex has “scaled back or paused many of our planned investments in our businesses both domestically and internationally,” says the report.
In an exchange with East-West Digital News, the Yandex press service offered a nuanced picture of the situation: “Some investments in new and experimental services will be temporarily suspended, but they might be resumed in the future. Meanwhile, we will continue to invest in key areas of our business, in particular in search, ride-hailing, e-commerce, streaming services, cloud, educational initiatives, etc.”
“We will also continue to fulfill all obligations to our partners,” the press service added.
No business visibility
Yandex concedes that, “n the current circumstances, [its] visibility over the short- and medium-term is extremely limited,” and that its previous guidance for 2022 “should no longer be relied upon.”
The company, whose stock has been suspended from trading since Feb. 28, just days after the war began, is “unable to say when or whether trading will resume on that market.”
Yandex maintains earlier announcements that it could default on its $1.25 billion convertible notes: “As a result of the Nasdaq trading suspension, the holders of [these] notes due in 2025 currently have the right to require us to redeem their notes at par.”
Lacking the funds available to redeem the notes in full, Yandex is “engaged in active discussions with a committee of noteholders with a view to agreeing to a restructuring of these obligations.” The company gives no assurance as to outcome of these discussions.
Yandex’s problems do not stop there. The recent weeks saw the company stop or reduce activities in the USA, where it tests its autonomous vehicles and experiments with robotised deliveries. Meanwhile, authorities in the Baltic states banned Yandex’s local taxi and delivery services. The company reportedly considers selling or shutting down its delivery business in the UK and France.
These developments are not mentioned in the report to the SEC, which is essentially dedicated to company performance in 2021.
