As an analyst with over two decades of experience in the tech and finance industries, I have seen my fair share of ups and downs, but the current situation at Telegram is a rollercoaster like no other. The criminal charges against CEO Pavel Durov, coupled with the company’s financial struggles, are raising serious red flags for potential investors.
The plans for a profitable Initial Public Offering (IPO) by Telegram within the next two years have faced significant hurdles due to criminal allegations levied against its CEO, Pavel Durov.
Over the past year, as a crypto investor looking ahead, I’ve found myself pondering on opportunities that might have come my way if only I were the CEO of Telegram, currently in detention in France. It seems this esteemed individual has been turning down offers from potential investors who placed a whopping valuation of over $30 billion on our Dubai-based messaging company.
2023’s financial data from Telegram, audited by the FT and yet unpublished, shows that the company brought in around $342 million in revenue during the previous year. However, it experienced an operational loss of $108 million, leading to a total after-tax loss of approximately $173 million.
Investigators in France are formally looking into Telegram’s founder and CEO, Pavel Durov, regarding suspected criminal activities connected to the messaging service. At this time, he is under judicial supervision but has not been arrested. He must post a €5 million (approximately £4.2 million or $5.6 million) bail as part of this process.
In the aftermath of Durov’s detainment, Telegram’s efforts to attract investors through its mix of conventional and digital financial tools have not been particularly successful. As reported by the Financial Times, the company has managed to secure approximately $2.4 billion through debt financing, which will mature in 2026. This includes a $1 billion bond issue in 2021, with Abu Dhabi state funds among the investors, as well as $330 million raised earlier this year in an offering that Durov claimed was over-subscribed.
Telegram’s founder, Durov, has personally invested approximately $64 million in company bonds, as disclosed by the 2023 financial statement. This investment was part of an effort to support Telegram’s expansion. Unfortunately, the value of these bonds has decreased significantly, currently trading at about 87 cents per dollar, with a yield exceeding 16%. Prior to Durov’s arrest at a Paris airport on August 24, the bond price was closer to 96 cents.
The drop in Telegram’s bond price following Durov’s arrest makes it more difficult for top-tier bondholders to swap their unsecured debts for equity at a reduced price before the Initial Public Offering (IPO). However, if an IPO occurs before March 2026, these senior bondholders would still have the chance to exchange their debt for equity at a lower cost.
“Would potential investors participate in Telegram’s IPO if they perceive it as controversial? It’s uncertain. This uncertainty also affects bond investors, who might view it as a chance to acquire the company at a reduced price. Regardless of the situation, I don’t anticipate a swift rebound for the bonds.”
The situation becomes even more complex due to the CEO’s substantial wealth in cryptocurrencies, specifically Toncoin (TON), which amounts to billions of dollars. Following Durov’s detention, the value of Toncoin has dropped by over 20% within the past week.
In an analysis of the recently disclosed papers by the Financial Times, it’s been unveiled that Telegram mitigated some of its substantial financial losses through its digital assets, valued almost at $400 million. Interestingly, in 2024, the company liquidated TON for approximately $244 million in cold hard cash, primarily to individual and institutional Russian investors.
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2024-08-30 12:55