VKontakte Founder Quits as CEO Amid Shareholder Conflict

Pavel Durov, the 29-year-old founder of Russia’s largest social network VKontakte, resigned as chief executive officer amid two shareholder groups fighting for control of the company.

“As a result of events following the shareholder changes in April 2013, the CEO’s freedom to manage the company has been substantially reduced,” Durov said. “Following my brother, who quit as chief technology officer in the middle of last year, I am relieving myself of the duties of CEO.”

United Capital Partners acquired a 48 percent stake in VKontakte last year, putting it at odds with billionaire Alisher Usmanov, whose Mail.ru Group Ltd (MAIL) owned 40 percent. UCP said Durov breached his fiduciary duty by developing Telegram, a competing messenger program, on his own.

Durov’s exit comes as rivals such as Facebook Inc. (FB) are making a push into Russia, Europe’s biggest Web market by users. Durov founded VKontakte in 2007 and made it popular by allowing users to upload music and movies for free.

VKontakte had 61 million active users in Russia as of December, ahead of 54 million at Mail.ru’s Odnoklassniki social network and 13 million Facebook users, according to researcher ComScore.

Shareholders will discuss procedures to select a new CEO at a board meeting this week, Nafisa Nasyrova, a spokeswoman for Ilya Sherbovich’s United Capital Partners, said by e-mail. A Moscow-based spokeswoman in Usmanov’s USM press office confirmed this. UCP and Mail.ru each have two members on VKontakte’s board of directors.

Usmanov Ally

Durov sold his 12 percent in VKontakte earlier this year to Usmanov’s ally Ivan Tavrin, who resold it to Mail.ru last month. If Durov quits as CEO because of pressure from the shareholders’ conflict, only Mail.ru has the experience needed to run the business, Usmanov’s asset manager, Ivan Streshinskiy, said at the time.

Executive Director Dmitry Sergeev was appointed in January and is backed by Usmanov. Sergeev, who previously headed Usmanov’s Kommersant publishing house, will be acting CEO of VKontakte, Georgy Lobushkin, a St. Petersburg-based spokesman for the social network, said by phone.

Durov plans to “participate in VKontakte’s life as founder,” though he won’t hold any formal positions, according to his statement. Durov’s Telegram reached 35 million users last month as more people chose to use encrypted messengers after Edward Snowden revealed the extent of U.S. surveillance over the Internet.

“So long and thanks for all the fish,” Durov said in the statement using the phrase from “The Hitchhiker’s Guide to the Galaxy” science fiction story. The message was left by the dolphins when they departed Earth just before it was demolished to make way for a hyperspace bypass.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Mark Beech, Robert Valpuesta

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