All posts by newsdoug

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…

VIDEO: iQiyi Goes Down LeEco Road With Sports JV

Bottom line: iQiyi’s establishment of a new sports joint venture and the venture’s subsequent 500 million yuan in funding point to a measured expansion for its premium content business, which will be key to its future success. 

iQiyi in sports joint venture

I’m being just a bit coy with today’s headline by suggesting that a new sports programming joint venture by online video site iQiyi (Nasdaq: IQ) resembles a similar expansion by disgraced former rival LeEco (Shenzhen: 300104). But the fact of the matter is that these two particular moves do look somewhat similar, even though I have far more respect for iQiyi than LeEco, for reasons that I’ll detail shortly.

Let’s begin by jumping right in with the news, which has iQiyi, whose main backer is online search leader Baidu (Nasdaq: BIDU), announcing the formation of a sports programming joint venture called Beijing Xin’ai Sport Media. (company announcement) iQiyi is partnering with Super Sports Media, a sports marketing company set up in 2010. As part of the deal, Super Sports Media will change its name to iQiyi Sports, implying this company is basically throwing its lot in with the larger iQiyi. Read Full Post…

INTERNET: Google Outed on China Search Plan

Bottom line: A new report on Google’s plan to launch a new China search engine within the next year looks credible, and underscores the company’s decision to put the market’s big potential ahead of the negative backlash such a move will bring.

Google prepares to enter eye of China storm

A story in a publication called the Intercept is making big waves in China, saying search giant Google (Nasdaq: GOOG) is preparing a major about-face on its decision to leave the country’s large but highly controlled search market. (English article) While I’ve never heard of this particular publication, the level of detail it contains appears to show it’s credible, which is probably why most major western media are running reports based on the story.

In short, the story says Google has quietly been developing a China-specific version of its search engine that will adhere to Beijing’s strict rules for self-censorship, and has code-named the project Dragonfly. Google previously operated such a search engine in China, but famously pulled out of the market in 2010 after deciding it didn’t want to adhere to those self-policing policies that require removal of all links to sensitive subjects. Read Full Post…

SMARTPHONES: Huawei Rolls Past Apple

Bottom line: Huawei could challenge Samsung for the global smartphone crown in as little as a year, though a potential Achilles heel could be the “outing” of its surging Honor brand that most may not associate with the Chinese parent.

Huawei passes Apple in global smartphone ranks

Smartphone pioneer Apple (Nasdaq: AAPL) has just reported its latest quarterly results, which means that all the data tracking firms can simultaneously release their own industry data showing the latest trends. Those trends show that Apple’s sales were basically flat for in the quarter on a unit basis, even as the bigger story was that the US giant lost its spot as the world’s No. 2 smartphone seller to a surging Huawei during the period.

The big picture is less that Apple is losing market share, and more that Huawei is surging in its march toward market dominance. Part of the reason behind the surge is booming popularity for Huawei’s sub-brand called Honor, which perhaps doesn’t carry the same stigma of the Huawei name. Read Full Post…

CHIPS: China Kills Qualcomm Mega-Merger With Silent Treatment

Bottom line: China used its traditional silent treatment approach to kill Qualcomm’s bid to buy NXP, quite possibly to show its displeasure with recent US trade tensions, but resulting global pressure could forced it to be more transparent in the future.

China kills Qualcomm-NXP deal with silent treatment

We’ll close out the week with my own quick-and-dirty post mortem of the collapsed deal that would have seen telecoms chip maker Qualcomm (Nasdaq: QCOM) purchase Dutch rival NXP (Nasdaq: NXPI) for $44 billion. Put simply, this deal appears to have been killed by China’s classic approach of “kill them with silence.”

But there’s a bit of a postscript this time around, as China’s regulator took the unusual step of actually breaking its silence once the deal was dead. This appears to show that China has learned a lesson from this particular battle, namely that it needs to take a stance on things and explain its decisions, even if people might disagree. That would be quite a break from its old approach of just sticking its head in the sand and pretending like nothing is happening when it makes unpopular decisions.  Read Full Post…