Prosus Group has announced plans to cease all of its involvement in its Russian operations, including Avito. The Dutch technology investor faced backlash last week for its involvement with Russian marketplace Avito. Avito, the second biggest classifieds site in the world, was being used as a vehicle to recruit soldiers for the war in Ukraine.
As soon as researcher Robert van der Noordaa flagged these military listings on Twitter, Netherlands-based Prosus Group was unable to distance itself from Russia. Russia is one of the major markets for Prosus, which is a division of Naspers. According to Financieele Dagblad, Avito accounted for 20 per cent of annual revenue of Prosus Group.
Avito becomes an independent entity
In a statement, Prosus has confirmed that its subsidiary OLX Group will cease all of its involvement in its Russian operations. As part of this effort, OLX Group says it has initiated a separation process which will decouple the companies into two independent entities.
Avito, the Russian classifieds marketplace, will operate as an independent Russian entity. Prosus further confirms that the company will be run by a local management team and governed by its own board of directors. Prosus also confirms that it will have no day-to-day involvement in the operations of the business.
One of the questions around Avito was how Prosus will divest its investment in the company, which had an estimated valuation of €5B. In a statement, Prosus says it will “neither invest further nor seek to benefit economically from the interest in Avito in these circumstances.”
The decision to cease all of its operations in Russia comes after Prosus CEO Bob van Dijk had announced plans to divest its Russian activities. It has already decided to write off a $769M stake in Russian social network VKontakte. Andrey Rogozov, CEO of VKontakte, was among the list of Russians sanctioned by the US and Prosus had a 27 per cent stake in the company.
In the past five days, shares of Prosus Group fell around 6.44 per cent on Euronext Amsterdam. The decline in its stock value is representative of the concerns among its investors, who are worried about the company’s exposure to the Russian market. The decision to cease its operations in Russia will not only result in immediate impact in its revenue but also strain its future investments.
Russian exodus for major global companies
Since Russia invaded Ukraine last month, all major companies found it difficult to continue operating in the country led by President Vladimir Putin. Tech companies were among the first to act in solidarity with Ukrainian citizens and were also forced to act after Ukraine’s Vice Prime Minister Mykhailo Fedorov’s tweet asking major companies to pull their services resonated around the world.
Major companies like Adobe, Apple, Amazon, Microsoft, Meta, Google, BMW, Bumble, Disney, Goldman Sachs, PayPal, Samsung, and others have stopped sales and services of their products in Russia. For the companies that didn’t voluntarily cease their operations in Russia, the sanctions imposed by the US, the UK and European Union forced them to act.
While the Russian economy is crippled by these sanctions forcing Russia to shut down its stock market and its currency Ruble has depreciated, companies like Prosus and its subsidiaries were found to continue their operations in Russia. With military recruitment on Avito coming to light, Prosus had no other option but to disassociate itself with its Russian entities.
While its decision to cease all operations in Russia will be welcomed by members of a group for Ukrainians in the Netherlands, who demonstrated in front of Prosus’s office in Amsterdam, the company will need to shed more light on its divestment plans and even invest in Ukraine for its previous misjudgement.