From the SMW archive. Originally published June 24, 2011. This article is preserved as a historical record — facts, figures, and market context reflect 2011.

VKontakte Seeks IPO in United States

By Ed Liston · June 24, 2011

VKontakte, the largest Russian social networking site, has decided to follow in the footsteps of its Chinese counterpart Renren Inc. (NYSE:RENN) and is holding discussions with investment banks and financial institutions about a potential initial public offering, according to sources close to the parties.

If the sources are to be believed, VKontakte is discussing selling shares in New York in 2012. No final decision has been taken on whether to launch the offering, or on its valuation.

VKontakte is a Moscow-based internet company whose name translates as ‘in contact’ in English. It is one of a group of Russian web companies that has faced and held off competition from Google Inc. and Facebook Inc. in the European market.

Yandex NV, owner of the most popular Russian search engine, raised about $1.3 billion in an IPO last month, making it the world’s largest technology IPO this year. Yandex has almost three times the market share of Google in Russia, and its shares trade at twice Google’s price relative to earnings.

Alexander Braun, an analyst, said regional social networks have an advantage over global players like Facebook in their home markets in the form of language, marketing and established networks, which helps them reach the critical mass required for a viable IPO.

Attempts were made to contact VKontakte about the planned offering; its spokesman, Vladislav Tsyplukhin, did not answer calls or return emails.

Mail.ru Group Ltd., a shareholder in Facebook, is among the major shareholders of VKontakte. Mail.ru spokesperson Valeria Komissarova declined to comment on a VKontakte IPO, as the company does not control VKontakte.

As of last month, VKontakte had more than 58 million users worldwide, 35.2 million of them in Russia. VKontakte and its services are popular not only in Russia but also in countries like Tajikistan and Kazakhstan, which have large Russian-speaking populations.

Many local Japanese and Chinese sites are giving stiff competition to Facebook. The Spanish social networking site Tuenti recently announced that it will open up to non-Spanish-speaking regions as well in order to increase its growth.

LinkedIn Corp. (NYSE:LNKD), the professional networking site, is trading around 46 percent above its IPO price from May.

Ed Liston was a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guided an independent team of experienced analysts and wrote for multiple stock trader publications.