Some minority shareholders of the Dutch Yandex NV were denied their exchange for securities of the Russian Yandex. In order to protect their rights, about a hundred retail investors filed a lawsuit in the Moscow Arbitration Court on July 10 against the Solid Management Management Company, the trustee of the ZPIF Consortium. First, the main owner of the new Russian IPC Yandex, learnedVedomosti” Some experts agree with the plaintiffs, while others see their prospects in court as unclear.
Image source: yandex.ru/company
The plaintiffs demand that the defendant either exchange their ordinary shares of Yandex NV Class A for Yandex shares at a ratio of 1:1, or buy them back at the market price of 4,250 rubles per share. On May 13, Solid Management offered retail investors in Yandex NV to buy their shares from them at 1,251.8 rubles or exchange them for shares of the Russian Yandex, but the offer was valid only for those who bought the securities on the Moscow Exchange or the St. Petersburg Exchange, or for those who credited them to accounts in Russian depositories before November 30, 2023. Exchange applications were accepted from May 14 to June 21, as well as on one additional day on June 27. The settlements were completed on July 9: 680,700 counter transactions were made on the Moscow Exchange with the exchange of 42.4 million shares for 180.3 billion rubles; on the St. Petersburg Exchange, 1.42 million securities were exchanged – 99% of those purchased on this platform.
Russian legislation does not provide for distinctions in rights between holders of shares of the same type – they can be established only depending on the volume of securities. But as a result of the defendant’s actions, only holders of shares purchased on the Moscow Exchange or the St. Petersburg Exchange received the right to conversion, while holders of the same shares, but purchased in over-the-counter trading, were deprived of this right. Such investors, according to them, find themselves owners of an illiquid asset without access to organized trading – they suffered property damage in the amount of the value of the shares they owned.
A company’s jurisdiction can be changed through redomiciliation or incorporation processes. The first involves preserving the company’s history, obligations, and legal form. The second involves establishing a new legal entity under any terms of distribution of the successor’s shares among the shareholders of the predecessor. In other words, the plaintiffs claim, Consortium. First, represented by Solid Management, minimized its costs and saved more than 150 billion rubles. The damage, in their opinion, was caused not only to them, but also to the Russian Federation, which would have received personal income tax in the amount of more than 20 billion rubles upon the buyout of shares.
The new owners of Yandex published the terms of the exchange or buyout only on May 13, and the shareholders of the Dutch Yandex NV did not know what procedure would be applied when changing jurisdiction. And the exchange terms established by the company established retroactive effect on relations that arose before their publication – without observing the conditions provided for by the Civil Code for giving retroactive effect to the agreement. Moreover, on the specified date of November 30, 2023, Yandex MKPAO did not exist, and the ZPIF Consortium. First was not a party to the transaction with Yandex NV. Knowing in advance about the possible restriction of investors’ rights, no one would buy shares of the Dutch company – the new owner hid, according to the plaintiffs, valuable information from them, acting in bad faith in order to extract maximum profit.
Before filing the lawsuit, the affected retail investors contacted Solid Management twice with a proposal to settle the dispute, but did not receive a response; on June 19, an appeal was sent to the Central Bank with a request to check the activities of the new owners of Yandex, but the regulator did not see any signs of violation of the law in their actions: according to the Central Bank, the new shareholders of the company were not obliged to make offers to the owners of Yandex NV shares.
The plaintiffs estimate their total portfolio at 6.5 billion, and the law firm Law & Capital, which represents their interests, continues to receive requests from those wishing to join the lawsuit, said its managing partner Viktor Obydennov. In his opinion, “the ZPIF, in essence, destroyed the shareholder value of our securities,” and the Dutch side will not give an adequate price for shares that have lost 95% of their value. Timur Aitkulov, senior partner at Aitkulov & Partners, who represents the interests of the ZPIF Consortium. First, emphasized that the new owners of Yandex acted within the law, there are no grounds for making claims, and the plaintiffs are trying to shift their unsuccessful investment decisions onto the defendant. The ZPIF made a buyout or exchange offer to the holders of Yandex NV shares only because the company needed them to pay off the transaction.
The experts interviewed by Vedomosti were divided in their opinions on the case’s prospects. Some pointed out that differentiation of the rights of holders of identical assets is indeed unacceptable. Others recalled that Russian legislation only allows for free participation in transactions. In addition, it is not entirely clear why the defendant in the case was a Russian company, and not the Dutch Yandex NV, whose shares belong to the plaintiffs – the primary reason for the depreciation of the shares was the sale of the key asset, and not the offer of Solid Management to certain groups of investors.
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