And Finally

Replenishing his arsenal

Russian tycoon sells Silicon Valley, buys China tech

Russian businessman Usmanov takes part in a forum dedicated to preparations for the upcoming 2013 Student Olympics in Kazan

Jack Ma fan: Alisher Usmanov

“My opinion – and I tell it openly – is that we need to strengthen every position to play on the level of such teams in the UK as Chelsea and Manchester City, in Europe like Real Madrid, Barcelona, Paris Saint-Germain and other clubs,” Arsenal football club’s disgruntled shareholder Alisher Usmanov complained last week.

Investing in new options is a facet of his business strategy too, including many of the world’s best-known tech stocks like Apple, Facebook, Groupon, Zynga, Twitter and Airbnb.

But despite his success in Silicon Valley – and his status as Russia’s richest man – Usmanov has been blocked from getting a seat on the board at Arsenal, even though he’s the club’s second largest shareholder.

The Uzbekistan-born tycoon is far more influential in the tech world, investing via his holding company USM or through his stake in DST Global, a specialist tech investor.

Increasingly, these punts have been in China, including Alibaba, which now enjoys a market capitalisation of $275 billion in New York.

“It wouldn’t be modest to tell you,” Usmanov teased his CNBC interviewer when quizzed about how much he has made from his holdings in the Chinese internet giant. He then admitted that he was “more than 500%” up, although this is paper profit because he is yet to sell a single share.

DST likes to invest late stage in high-growth companies, giving the founders a little more time to boost their prospects for a jumbo IPO. Hence the interest in news that it is also an investor in Xiaomi, the four year-old smartphone maker, which Usmanov praised as “a future technological giant”. DST was said to be part of talks to raise another $1.5 billion for Xiaomi last month, in the largest private financing for a venture-backed company since Facebook three years ago.

Through DST Usmanov also owns about 11% of JD.com, Alibaba’s nearest rival in China, although it sold down some of its stake after JD.com’s IPO earlier this year (and may sell more this month in a placement round).

Nimble-footed in his career moves, Usmanov made his first fortune in metals and mining, then diversified into telecoms and internet businesses in Russia, before broadening again into some of Silicon Valley’s most respected names.

More recently he has switched tack once more, panhandling for opportunities in China and India, and selling most of his American investments, including the remainder of his position in Mark Zuckerberg’s social networking monolith.

“I admire Facebook, but I said ‘arrivederci Facebook’,” Usmanov explained.

Partly that is because he senses richer pickings in China, with Ivan Streshinskiy, head of USM’s advisory arm, telling Bloomberg in March that companies like Alibaba could show “the same or even better returns” than earlier investments in Silicon Valley.

Chinese firms account for 70-80% of USM’s overseas internet picks, Streshinskiy reported.

Increasing his bets in China may be linked to Usmanov’s efforts to protect his position, his critics say. That follows speculation that he could be frozen out of Western markets as part of the campaign to pressure the Russian President Vladimir Putin by targeting businessmen closely linked to him.

In the meantime Alibaba’s connections look formidable in their own right, now that the richest men in three different countries (Jack Ma from China, Masayoshi Son from Japan and Usmanov from Russia) all hold stakes in the Hangzhou-headquartered firm.

Not that any of this is helping Usmanov get more say at his favourite football club. Frustrated that Arsenal won’t spend more on new players, he also says that the team’s manager Arsene Wenger must change his approach. “I like Arsene for his principles, but principles are a sort of restriction. And restrictions are always lost possibilities,” Usmanov warned last month.


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