Billionaire Alisher Usmanov, who made more than $1 billion investing in Facebook Inc. (FB:US), is now avoiding the U.S. and focusing on China, where the company holds stakes in online-commerce companies.
The valuations of U.S. technology companies are too high to justify making new investments, Ivan Streshinskiy, chief executive officer of the company that manages Usmanov’s assets, USM Advisors LLC, said in an interview at Bloomberg’s headquarters in New York.
“We’re not investing in the U.S. at the moment,” Streshinskiy said. “People got used to these huge multiples, often forgetting about the basic fundamentals of the business.”
The Uzbekistan-born Usmanov, 59, emerged as Russia’s richest man this year following a shift from commodities to technology. After backing successful Web services in Russia, Usmanov is seeking companies in other growth markets that can benefit from the spread of Internet-connected mobile devices.
“When you are doing even something small for China, it’s really big on a global scale,” said Streshinskiy, 43. USM owns stakes in Alibaba Group Holding Ltd. and 360buy Jingdong Mall, two e-commerce companies that fit into Usmanov’s strategy of holding companies and profiting when they go public.
Usmanov, worth $17.2 billion, has invested in the companies through Digital Sky Technologies, a fund run by Mail.ru Group Ltd. co-founder Yuri Milner. Usmanov has relied on Milner for his Internet investments since 2008.
Usmanov’s telecommunications, Internet and media assets account for more than half of his fortune, according to Bloomberg Billionaires Index. The rest comes from his iron-ore producer Metalloinvest, 4 percent of Russian miner OAO GMK Norilsk Nickel, 29.9 percent of the Arsenal Football Club (AFC) and cash, including proceeds from the sale of Facebook shares.
The billionaire is particularly interested in e-commerce in China, Streshinskiy said. Alibaba Group, the country’s largest e-commerce company, was valued at $40 billion in September, when an investment group led by China Investment Corp. paid $2 billion to acquire a 5.6 percent stake, a person familiar with the matter said at the time.
Earlier this year, Alibaba repurchased a 20 percent stake in itself from Yahoo! Inc. (YHOO:US) ahead of a potential initial public offering. 360buy, meanwhile, said in June it won’t seek an IPO until 2013.
In Russia, Usmanov’s Mail.ru (MAIL) Internet company may consider selling its 40 percent of VKontakte, the country’s most popular social network, Streshinskiy said. VKontakte leads the market, followed by Moscow-based Mail.ru’s Odnoklassniki and My World.
Closely held VKontakte, run by programmer Pavel Durov who started the site in 2006, will thrive only if it continues to be led by its founder, Streshinskiy said.
“This social network can be only successful when it’s run by the young energetic founder Pavel Durov,” Streshinskiy said. “Boosting the stake and pushing Pavel to be part of a corporation such as Mail.ru may be counter-productive.”
Mail.ru has tried to boost its stake in St. Petersburg-based VKontakte to cement its dominance of the Russian social-networking market, people familiar with the matter said in October. Mail.ru gaining control of VKontakte would mean Usmanov has the three largest social-networking services in Russia, each with more users than Facebook has in the country.
Vyacheslav Mirilashvili and Lev Leviev, who provided funds to Durov to start VKontakte, have no plans to sell their combined 48 percent stake, Leviev said in October.
VKontakte was valued at $1.5 billion based on Mail.ru’s purchase of 7.44 percent of the company for $112 million last year. The St. Petersburg-based social networking site shelved a planned initial public offering in May after Facebook shares plunged following its IPO.
When Usmanov acquired a Facebook stake in 2009, his fund persuaded founder Mark Zuckerberg to sell by giving up its voting rights. Usmanov and Milner bought about 10 percent of Facebook when the company was valued at $6 billion to $10 billion, Usmanov told Russian TV channel Rossiya 24 this year. Usmanov sold about a third of his holdings in Facebook’s May IPO for about $1.4 billion, according to data compiled by Bloomberg.
After additional selling, Usmanov has about a third of his Facebook investment left, and he can’t sell that stake until May because of a lockup restriction, Streshinskiy said.
Usmanov has been selling his stakes in Groupon Inc. (GRPN:US) and Zynga Inc. (ZNGA:US) as well. This year, Usmanov also gained control of Russia’s second-largest mobile-phone operator OAO MegaFon (MFON), which raised $1.7 billion in an IPO in London last month.
Asked whether Usmanov will sell the remainder of his Facebook stock when the lockup expires, Streshinskiy said, “We’ll see.” The shares have fallen 28 percent since the IPO amid concern that the company isn’t increasing sales from mobile advertising quickly enough.
“They have a brilliant team,” Streshinskiy said. “They can have a bright future.”
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