Durov’s Arrest Jeopardizes IPO Telegram

Telegram, a popular messaging platform, is facing serious challenges following accusations against its founder Pavel Durov. The allegations have caused a decline in the prices of the company’s bonds and cast doubt on its plans for the upcoming years.

In March 2024, Durov had revealed intentions to go public through an IPO, turning down offers from investors who valued the company at over $30 billion. However, the possibility of the IPO happening was thrown into uncertainty due to allegations in France regarding inadequate measures to combat illegal content on the platform, particularly content related to violence against children. Durov could face preliminary charges, including one carrying a potential 10-year prison sentence.

These accusations have dealt a significant blow to Telegram, which had been actively seeking to boost its revenue by introducing subscriptions and advertising options to achieve financial self-sufficiency by 2026. In 2023, the company generated $342 million in revenue but incurred operational losses of $108 million, resulting in total post-tax losses of $173 million.

Telegram has been relying on debt funding, with outstanding debts totaling around $2.4 billion due for repayment in 2026. A recent bond issuance of $330 million faced a decrease in value following Durov’s arrest at an airport near Paris, causing bond prices to drop from 96 to 87 cents per dollar and increasing bond yields to 16%.

The accusations and arrest have raised concerns among investors regarding the company’s reliability and future prospects, particularly in relation to the planned IPO. Some have speculated that private investors may seek to take advantage of the situation to acquire the company at a discounted price.

Telegram is closely associated with the Toncoin cryptocurrency developed by its team. In 2023, the company’s digital assets, valued at nearly $400 million, helped mitigate some of its financial losses. However, following Durov’s arrest, the value of Toncoin plummeted by almost 20%.

Following Durov’s arrest, Telegram has refrained from making any public statements on the matter. The company is known for its centralized management structure, where key decisions are made by Durov himself. Telegram also prides itself on its lean workforce and the overall dedication of its employees to the company’s mission.

For years, Durov has advocated for minimal content moderation, championing free speech and resisting data transfers to third parties, including governments. However, the recent allegations and events have raised doubts about the company’s future and its ability to sustain its operations in its current form.

/Reports, release notes, official announcements.