SEARCH: Google Takes Offensive on China Search Return

Bottom line: Google’s decision to finally talk openly about its plan to return to China looks smart though slightly late, by explaining the desperate need for alternatives in the massive though tightly controlled search market.

Google breaks silence on plan to return to China search

After staying mum on the subject for quite some time, Google (Nasdaq: GOOG) is finally speaking out on its controversial decision to return to the China search market. Its CEO Sundar Pichai broke the company’s silence on the matter at an event this week sponsored by Wired magazine, going on the offensive to try and defend his company’s decision.

It does seem like the company should have taken this kind of more aggressive approach sooner, rather than waiting more than two months from when the news first broke. (previous post). From my perspective as someone living in China, this country is really in dire need of an alternative to current search leader Baidu (Nasdaq: BIDU), and the argument has nothing to do with propaganda or censorship.  Read Full Post…

HARDWARE: Is China Spying on Western Hardware?

Bottom line: A Bloomberg report on Chinese government spying microchips in hardware used by Apple, Amazon and others may be flawed, but highlights the potential for such spying due to China’s important place in the global supply chain.

Controversy builds over story of China spyware

As I return to blogging after a couple weeks absence, I wanted to weigh in on an explosive story that ran last week in Bloomberg about tiny spying chips that had been secretly loaded by China’s military onto globally used motherboards. Quite a bit has happened since the original story’s publication (English article), which said that tiny custom-made chips developed by the People’s Liberation Army had secretly been installed into motherboards assembled in China by US hardware maker Supermicro (OTC: SMCI).

The story, which went out of its way to quote quite a few unnamed sources to bolster its credibility, went on to say that those motherboards had been used in servers used by a wide range of companies and government agencies, including Apple (Nasdaq: AAPL) and Amazon (Nasdaq: AMZN). Everyone initially applauded the ground-breaking report, which appeared to show how China could easily insert itself into the global high-tech complex by taking advantage of its important place in the hardware supply chain. Read Full Post…

E-COMMERCE: Dangdang Orphaned by Cash-Challenged HNA

Bottom line: The collapse of Dangdang’s $1.2 billion sale of itself to HNA shows the deal was most likely fueled by backdoor connections with no grounding in financial reality, and the company will probably be sold ultimately at a much lower price.

Dangdang comes out a lemon after HNA sale collapses

It’s Friday and I’m quite looking forward to the weekend, so I thought I’d indulge myself with a more gossipy post on the latest troubles of e-commerce has-been Dangdang. Anyone looking for good stock tips with this one will probably be somewhat disappointed, since Dangdang was one of a large group of Chinese firms to privatize from New York over the last few years in pursuit of higher valuations by re-listing at home.

A number of companies from that re-listing wave have already re-listed here in China, often with results that bore out the thesis that such a process was well worth the effort. Among those are names like Focus Media (Shenzhen: 002027) and Homeinns (Shanghai: 600258), which are now worth considerably more as China-traded companies than they ever were in New York. Another notable success is WuXi AppTec (Shanghai: 603259), a drug maker that was part of the larger WuXi PharmaTech that de-listed from New York in 2015. Read Full Post…

IPOs: What’s Up With Spikes, Declines for Nio, Qutoutiao?

Bottom line: Big volatility for first-week trading debuts of Nio and Qutoutiao point to problems with pricing and investor indecision in the current market, and could point to more rocky debuts for at least the next few weeks. 

Nio, Qutotiao go “pop”, but then fizzle

When I previously wrote about low expectation for an IPO last week by new energy startup Nio (NYSE: NIO), I wasn’t all that surprised when the company notched a more upbeat New York debut with a 5 percent gain on its first trading day. After all, the company had been so beaten down during the IPO process that this was something akin to a dead-cat bounce and a small present for the money-losing company as it entered the publicly traded realm.

But then the stock suddenly soared by more than 70 percent on its second trading day — something one seldom sees with new IPOs. I was tempted to write the whole thing off as manipulation, even though I had no direct evidence, since the company sold around 90 percent of its IPO shares to just 10 investors. That meant that a couple of large investors could have simply traded their huge blocks of shares between each other at inflated prices, and neither would have lost any money in the process. Read Full Post…

IPOs: Meituan-Dianping Listing Shows Signs of Life

Bottom line:  Nio stock is likely to give back most of its huge second day gains over the next couple of weeks, while Meituan-Dianping could debut strongly but will likely stagnate for its first two years as a public company.

Meituan, Nio display surprising strength

It seems that perhaps I was a bit premature earlier this week when I wrote the latest listing by electric vehicle (EV) maker Nio showed investors had lost appetite for money-losing Chinese tech firms. Nio’s stock has actually done quite well in its first two trading days, after a tepid pre-debut reception. And now we’re getting word that money-losing online-to-offline (O2O) services giant Meituan-Dianping has also priced its own mega-offering in Hong Kong at the top of its range.

Such a sudden shift in sentiment seems hard to explain, and I do suspect there may be at least a little manipulation going on behind the scenes. Still, perhaps investors are feeling just a tad more upbeat about Chinese tech these last few days in light of new signs that the US-China trade war may soon ease with new talks scheduled to try to hammer out a deal. Read Full Post…

IPOs: EV Maker Nio Sputters Out of the Gate With Weak Pricing

Bottom line: Nio’s shares are likely to debut flat to down slightly in a lackluster New York trading debut, capping an IPO process pockmarked by investor skepticism.

Investors fail to charge Nio IPO

Wall Street investors will get a taste of a new flavor of Chinese company very soon, when homegrown electric vehicle maker Nio makes its trading debut on Wednesday. But based on all the signals so far, this offering for a company that some have likened to China’s answer to Tesla (Nasdaq: TSLA) could be a major flop. That would be somewhat appropriate given all of the real Tesla’s current woes, which point to the difficulties of building up a major new car maker from scratch.

Nio’s road to New York has been pockmarked with negative signposts pretty much all of the way. The latest of those has media reporting the company has priced its IPO American depositary shares (ADSs) at the very bottom of their range, at a price of $6.25 apiece, raising a total of $1 billion. (English article) That compares with an initial target of up to $1.8 billion, and I’ve heard that even that figure was trimmed back from initial hopes of more like $2 billion. (English article) Read Full Post…

IPOs: Meituan-Dianping Heads List of Money-Losing New Listings

Bottom line: Meituan-Dianping’s IPO is likely to meet with lukewarm reception due to its big losses in several key areas, but could become more attractive over the medium term as it emerges as industry leader in one or two key areas.

Restaurant ratings leader takes IPO orders

As the rest of China continues to fixate on the sex scandal surrounding e-commerce giant JD.com’s (Nasdaq: JD) CEO, I thought I would end the week on a less controversial subject with a look at another blockbuster IPO by online-to-offline services giant Meituan-Dianping. The company has officially filed to make a listing in Hong Kong, and could be one of a growing number of Chinese Internet firms to choose the former British colony over the U.S. following a rule change earlier this year.

That change allowed companies to list in Hong Kong using a dual-class share structure that gives disproportionate voting power to company managers over ordinary shareholders. Previous prohibition of such a structure was the key element that led e-commerce giant Alibaba (NYSE: BABA) to make its own record-breaking IPO in New York instead of Hong Kong in 2014, and no doubt Hong Kong is still smarting over that loss. Read Full Post…

E-COMMERCE: CEO Sex Allegations to Rock JD.com Stock?

Bottom line: The detention of JD.com’s CEO on sexual misconduct allegations makes for good headline fodder, but is unlikely to have any extra impact on the company’s stock that is already under pressure.

JD CEO questioned over sexual misconduct claims

The Chinese media have been buzzing all weekend over reports that e-commerce giant JD.com’s founder and CEO Richard Liu was detained by police in the U.S. over sex-based allegations. The story certainly does make for titillating headlines, and will certainly come as a slight embarrassment to JD if and when the company and Liu ever fess up to anything inappropriate.

But from a business perspective, JD probably has bigger fish to fry than a small sex scandal involving Liu, who seems to have a penchant for this kind of thing. The biggest issue for the company is sustained profitability, which has been elusive since its original Nasdaq IPO in 2014. Investor patience is clearly wearing thin towards the company, which has been running mostly on hopes and a few major positive strategic alliances to prop up its shares these last few years. Read Full Post…

INTERNET: Google Feels China Backlash From Own Employees

Bottom line: An internal petition calling on Google to be more transparent about its plans to return to China represents the first major backlash to the move, but is unlikely to dissuade the company from going ahead.

Google employees question China return

When the news first broke a couple of weeks ago that Google (Nasdaq: GOOG) was planning a return to China’s search market, many predicted that western sources would be quick to criticize the plan, even though few voices have actually spoken out so far. Fast forward a couple of weeks, when we are hearing the first sounds of what’s likely to become a sea of protests if and when the company actually makes its China search homecoming.

Perhaps not too surprisingly, the first salvo in the storm of protest that could soon emerge is coming from within Google itself, with word that employees are circulating a petition raising questions about the reported move. (English article) This kind of internal debate could be especially troubling, since the last thing that Google wants is an uprising within its own ranks at such a delicate time. Read Full Post…

INTERNET: Tencent Slumps Under Government Wrist-Slap

Bottom line: Tencent’s sudden pulling of a popular game just days after its release shows no one is exempt from Beijing’s recent online entertainment clampdown, which could weigh on stocks of related company for the next few months.

Tencent gets wrist slapped by regulator

A new statement from leading online game operator Tencent (HKEx: 700) is dripping with contrition, following the sudden yanking of a new hit game from its platform that apparently didn’t pass muster with the regulator. This latest Tencent news, combined with some downbeat earnings from live broadcasting specialist Huya (Nasdaq: HUYA) and its parent YY (Nasdaq: YY), have cast a chill over Chinese gaming and video stocks, which took a beating in Tuesday trade.

Tencent has been leading the crowd, shedding 3.4 percent on Tuesday and down another 3.2 percent in early trade on Wednesday. Those two declines have collectively wiped out more than $4 billion in market value from one of the world’s most valuable Internet companies. The bloodbath was felt among the broader realm of Chinese companies that provide any form of video content over the Internet, be it games, live broadcasting or even traditional moves and TV shows. Read Full Post…

IPOs: China Tower, BeiGene IPOs Fail to Excite in HK

Bottom line: Lackluster debuts for two of this year’s largest China IPOs in Hong Kong points to a cresting of the current new listing wave, with sentiment starting to wane as investor appetite for new choices gets satisfied.

China Tower, BeiGene in lackluster debuts

Two of the year’s biggest China IPOs have formally launched in Hong Kong this week, each with a different story and accompanying moral to tell. The larger of those, and the world’s largest IPO in the last two years, has seen state-run cellular tower operator China Tower (HKEx: 0788) raise nearly $8 billion, while the second has seen biotech firm BeiGene (HKEx: 6160; Nasdaq: BGNE) raise a smaller but still significant sum of nearly $1 billion.

These two listings are about as different as you could possibly ask for, at least in terms of the companies’ backgrounds. On the one hand China Tower is a big state-owned behemoth that was formed by the telecoms regulator a few tears ago by pooling the cellular toward assets of China’s big three telcos. At the other end of the spectrum, BeiGene is a privately-backed hotshot that develops biologically-based cancer-fighting drugs. Read Full Post…