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Russian Social Network VKontakte Said to Weigh IPO in U.S.

June 24 (Bloomberg) -- VKontakte, the largest Russian social networking website, is in early discussions with investment banks about a potential initial public offering, people with knowledge of the talks said.

The company has discussed selling shares in New York as early as next year, the people said, declining to be identified as the matter is private. No final decision has been made on whether to press ahead with an offering or on a valuation, the people said.

The Moscow-based social network is among a group of Russian Web companies that have held their own against Google Inc. and Facebook Inc. in one of Europe’s largest markets. Yandex NV, the owner of the most popular Russian search engine, raised $1.3 billion in an IPO last month in New York, this year’s largest technology IPO worldwide.

“Regional social networks often have advantages over global players like Facebook in their home region when it comes to language, marketing and having established networks present,” said Alexander Braun, an analyst at Montega AG in Hamburg. “That could help them create the critical mass needed for a viable IPO.”

Vladislav Tsyplukhin, a spokesman for VKontakte, didn’t return calls and e-mails seeking comment.

VKontakte’s shareholders include Russian Internet company Mail.ru Group Ltd., which also owns a stake in Facebook. Valeria Komissarova, a spokeswoman for Mail.ru, couldn’t comment yesterday, as the company doesn’t control VKontakte.

Spain, Germany

VKontakte had 58 million users worldwide as of last month, including 35.2 million in Russia, according to comScore Inc. The services of the site and other Russian Internet companies are also popular in countries such as Kazakhstan and Tajikistan, which have large Russian-speaking populations.

Tuenti, the Spanish social networking site owned by Telefonica SA, said last month it would open up to users outside the country to increase its growth potential. Local sites in Japan and China also remain popular competitors to Palo Alto, California-based Facebook.

In Germany, the student social network StudiVZ.net., owned by Verlagsgruppe Georg von Holtzbrinck GmbH, has battled Facebook over intellectual property rights in past years. An IPO of the networking site is unlikely, Montega’s Braun said, citing declining user numbers at its sites.

U.S. IPOs have raised $30.5 billion so far this year, the most in major markets, beating the $23.6 billion for initial sales in mainland China and the $13.6 billion for Hong Kong deals, according to data compiled by Bloomberg.

Professional-networking site LinkedIn Corp. trades about 46 percent above its May IPO price when it raised $353 million. Yandex trades about 20 percent higher than its initial price.

Shares of Renren Inc., the Chinese social-networking site that completed an $855 million IPO last month, more than halved since its offering. The stock gained 29 percent on its first day of trading.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Zijing Wu in London at zwu17@bloomberg.net; Matthew Campbell in Cannes via mcampbell39@bloomberg.net.

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Kenneth Wong at kwong11@bloomberg.net

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