US sanctions to hit Israeli tech cos with Russian investors

Roman Abramovich
Roman Abramovich

Investments by Roman Abramovich and other Russians in Israeli tech companies may have to be sold or put into trust.

Roman Abramovich's decision to put English Premier League soccer team Chelsea, which he owns, into the hands of a charitable trust, was announced even though he has so far not been placed on the list of Russian oligarchs subject to sanctions. Abramovich has denied close to connections to Russian President Vladimir Putin.

Abramovich, who also has Israeli citizenship, is a veteran donor to Israeli philanthropic organizations like Yad Vashem, and also has investments in Israeli tech companies. According to IVC Research, his tech investments include mobility solutions company Via Transportation, media engagement platform Open Web and electric vehicle fast charging battery developer StoreDot.

"If the Americans impose sanctions, it is serious"

Adv. Yuval Sasson who heads compliance at the Meitar law firm told "Globes" about the possible serious consequences for Israel of the current fighting. "Although we are still in the midst of the event, there is still no doubt that as long as the sanctions will continue, there will be dramatic implications for Israeli industry. All partnerships with a Russian investor, even if we are talking about minority stakes, even if not imposed upon them personally, might influence the ability of the company to function in the future. When the Americans impose sanctions, they relate to it seriously and the enforcement can be very painful, so caution must be exercised."

Adv. Ami Ben-Yacov, who has been involved in many financing rounds for Israeli startups from Russian and Belarus investors, details the possibilities. "It is possible that as in the case of Chelsea, the entrepreneurs will ask the Russian investors to manage their investments through a blind trustee. In such a case a Chinese wall is created around the information between the company and its investors, while protecting all the economic rights of the investor."

Tightening oversight distances the Russian investors

The amount of Russian investment in Israeli companies has been falling since 2015. According to IVC Research, the number of investments annually in Israeli companies by Russian investors has fallen from 15 in 2015 to four last year. Adv. Ben-Yacov explains that, among other things, this is because of the halt in incentives for international investments and a tightening of supervision in the global money laundering sector. Prominent investments in recent years by Russians in Israeli companies have included fintech company Sunbit, media engagement company OpenWeb, and taxi hailing app Gett.

Among the shareholders in Gett are Russia's Sberbank, which has been put on the US sanctions list and will not be able to trade in dollars from March. Sberbank is also an investor, according to IVC, in Israeli trading platform eToro, through its venture capital fund SBT.

One senior Russian investor explained that most Russian investments are in a minority stake. "The investments are a result of the years in which startups benefitted from this capital, which was easy to obtain. Now we see high-tech entrepreneurs understanding that follow-on money from their investors will be difficult to receive. Many of them are beginning to think how to dilute, or sell these shares."

At the end of last week, Hanaco Ventures partner Alon Lifschitz tweeted that Biden's sanctions will create a problematic situation for Russian investors. "They will need to make decisions on what to do with the money and the holdings."

Published by Globes, Israel business news - - on February 27, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Roman Abramovich
Roman Abramovich
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