Yandex board of directors has approved targeted amendments to the company’s corporate governance structure, to «respond to an evolving regulatory environment». Moreover, Anton Gorelkin, the lawmaker behind the proposed legislation capping foreign ownership of significant Internet resources at 20%, withdrew the bill.
In our view, these changes suggest a constructive dialogue between the company and the state. Moreover, during the conference call Yandex management confirmed that all the changes resulted from lengthy negotiations with government agencies and were approved by them.
The news therefore offset the risks of dramatic changes in the company's ownership structure and its business integrity breach, which is positive for the value of Yandex and its shares (+11% on Monday, November 18). Our Yandex target price is ₽2850 per share with an investment period through 2020 (+13% upside).
On a separate issue, Yandex board of directors has launched a repurchase programme totalling up to $300 mln worth of Class A shares of Yandex N.V. that will be in effect for up to twelve months, a move that is seen to bolster the company’s shares.
Corporate management structure changes include the creation of a Public Interest Foundation (PIF), with no economic rights, but with certain limited governance rights.
Arkady Volozh, CEO and founder of the company, intends to transfer 48.4% of Class B shares (with 10:1 votes against Class A shares) to a family trust. The amendment would provide that Class B Shares held by a family trust would not automatically convert until the end of a period of two years following the holder’s death, at which point the shares will automatically convert into Class A Shares. Mr. Volozh and the Volozh Family Trust intend to enter into a lock-up agreement in favour of the Company with respect to 95% of the Class B Shares currently held by Mr. Volozh, pursuant to which they will undertake not to dispose of such shares until 2022. The amendments guarantee against dramatic changes in the company's voting structure in the coming years. No changes in the governance and ownership structure are planned, the management confirmed during the conference call.
The proposed amendments are subject to shareholder approval on December 20, 2019 (75% of votes are required with a 50%+ turnout), including the separate approval of the Class A shareholders. The record date for the shareholders meeting is November 22, 2019.