Telegram, the popular messaging app, is facing a critical juncture as its financial future becomes increasingly uncertain following the criminal charges brought against its CEO, Pavel Durov. The French authorities’ actions against Durov have significantly impacted the company’s plans for a lucrative IPO and left its bondholders grappling with steep losses over the past few days.
IPO Plans in Jeopardy
Earlier this year, Durov revealed plans for a potential IPO within the next two years, aiming to capitalize on Telegram’s growing user base and monetization efforts. However, the criminal charges against him in France have cast a shadow over these ambitions. Experts warn that any potential listing would struggle to attract advertisers, especially with Telegram now being linked to allegations of failing to address criminal activities on its platform, including child sexual abuse material. This negative association could severely limit the types of advertisers willing to engage with Telegram, leaving it reliant on less reputable sources, such as crypto scams and rapid weight-loss ads.
Financial Struggles and Bondholder Concerns
Telegram’s financial situation has also come under scrutiny. The company’s 2023 financial statements, seen by the Financial Times, reveal revenues of $342 million against an operating loss of $108 million, with total losses amounting to around $173 million after tax. Despite these figures, Durov, who owns Telegram entirely, has invested “hundreds of millions” into the company, including at least $64 million in Telegram bonds.
However, the market’s reaction to Durov’s arrest has been swift and severe. The price of Telegram’s bonds has plummeted, trading at around 87 cents on the dollar with yields surpassing 16%. This is a significant drop from their previous trading value of around 96 cents before Durov’s arrest. Bondholders, who have the option to convert their debt into equity at a discount if an IPO occurs before March 2026, now face a difficult dilemma. The uncertainty surrounding Telegram’s future makes it unclear whether investors would buy into an IPO, especially if the platform’s reputation is tarnished.
Adding to the tension, bondholders have reported receiving no communication from Telegram following the arrest, further exacerbating concerns about the company’s financial stability.
Impact on Digital Assets and Broader Implications
Telegram’s digital assets, which have been a critical component of its financial strategy, have also been affected. Toncoin, a cryptocurrency initially developed by the Telegram team, has seen its value decline by nearly 20% in the wake of Durov’s arrest. In 2023, these digital assets were valued at nearly $400 million and were instrumental in offsetting some of Telegram’s financial losses. The company also raised over $244 million from the sale of Toncoins in 2024, but the recent events have cast doubt on the stability of these assets.
The fallout from Durov’s arrest has extended beyond Telegram’s financial woes. In a related development, the UAE canceled a $20 billion Rafale deal with France, reportedly in response to the controversy surrounding Durov’s arrest. This decision underscores the broader geopolitical implications of the situation and highlights the potential diplomatic tensions it has sparked.
Centralized Leadership and Future Outlook
Pavel Durov’s centralized leadership style has long been a defining feature of Telegram. The company, which boasts nearly 1 billion users, operates with a small, closely-knit team of about 50 employees, including 30 highly-vetted engineers. Durov’s hands-on approach to product development and his commitment to libertarian ideals, particularly regarding free speech and platform moderation, have shaped Telegram’s identity.
However, these same qualities now raise questions about Telegram’s ability to function without Durov at the helm. As Aleksandra Urman, a researcher at the University of Zurich, notes, the company’s future is uncertain if Durov is unable to continue leading due to legal troubles.
Despite the turmoil, Telegram has maintained that it has “nothing to hide” and has defended its moderation practices as being “in line with industry standards.” The company’s staunch refusal to disclose user data to third parties, including governments, remains a point of principle for Durov and his team.
Widespread Reactions
The arrest of Pavel Durov has garnered significant attention and sparked reactions from various quarters. Elon Musk, the tech billionaire, publicly called for Durov’s release, highlighting the widespread concern over the arrest and its potential implications for freedom of speech and digital rights.
Telegram’s future remains in flux as the company navigates these challenges. Whether it can recover from this crisis and achieve its IPO ambitions will depend on the outcome of Durov’s legal battles and the company’s ability to reassure investors and bondholders of its long-term viability.
Credit: ft.com
