Russia’s richest man, a billionaire named Alisher Usmanov, wasn’t one of the unlucky investors squashed by Facebook’s belly-flop of an initial public offering.
An early backer of Facebook, Usmanov managed to propel himself to the very top of the ranks of Russia’s wealthiest people this year with the well-timed sale of shares in the social networking company. He sold a third of his Facebook holdings for $1.4 billion in the company’s May IPO, helping to bring his fortune to $17.2 billion, according to data compiled by Bloomberg.
Usmanov made a mint on the Silicon Valley company at a time when many people on the tail end saw their money evaporate. Shares have fallen 27 percent since the IPO amid concerns about Facebook’s business model. That’s what makes Usmanov’s new stance on U.S. technology companies, which my colleagues Ilya Khrennikov and Sarah Frier reported on today, noteworthy.
Usmanov’s stance now is that U.S. technology company valuations are too high for his firm to justify making new investments, said Ivan Streshinskiy, chief executive officer of the company that manages Usmanov’s assets, USM Advisors. The firm is focusing more on China instead.
“We’re not investing in the U.S. at the moment,” Streshinskiy said in an interview at Bloomberg’s headquarters in New York. “People got used to these huge multiples, often forgetting about the basic fundamentals of the business.”
Before going public, Facebook was a lead example of the inflated valuations that many technology companies took on. Investments from high-profile firms like Usmanov’s pushed the company’s valuation higher while little public information existed about its finances. In that sense, Usmanov was key in creating the thing he’s now shunning.
Facebook has well-documented troubles in building an advertising business around mobile phones, issues that the company tried to obscure prior to the IPO, contributing to the stock’s sharp decline. (The Securities and Exchange Commission didn’t find evidence that material information was withheld, a person familiar with the matter told Bloomberg News in October.)
Uzbekistan-born Usmanov, 59, was a rich man well before he acquired a Facebook stake in 2009. His fortune was certainly enhanced by the deal, but was by no means dependent on it. His investments are often made through Digital Sky Technologies, a fund run by Mail.ru Group co-founder Yuri Milner. (It’s worth noting that Milner hasn’t completely soured on Silicon Valley. He made a personal investment in San Francisco-based Prismatic in a $15 million round announced today.)
So what lesson can ordinary investors learn from Streshinskiy’s comments?
Financiers such as Usmanov are not necessarily in it to help out the casual trader. They are consummate insiders whose fortunes make them kingmakers and market movers, powerful money men whose access and interests can steer billions of dollars in a company’s direction with little more than a public endorsement. Their cash is the engine that makes many hot startups run.
They’re imperfect guides to the market because they can win even when many others lose.
As for his sentiments about Facebook in particular? The company has a “brilliant team” and “can have a bright future,” Streshinskiy said, but he did not rule out Usmanov selling the remainder of his Facebook stock when a lockup expires in May.