FUND RAISING: Mango Pares Back Plans, Lufax Thinks Big

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Bottom line: Mango TV’s scaled-back new funding reflects the potential and stiff competition in China’s online video market, while Lufax’s Chinese and foreign roots could make it a name to watch in the emerging private financial services sector.

Mango TV nears $1.5 billion funding

Two fund-raising deals likely to be among China’s largest next year are in the headlines as we close the week, led by a major paring back of plans by upstart online video company Mango TV. The other news is shedding more light on aggressive expansion plans by Lufax, another upstart in the peer-to-peer (P2P) lending space, which is in the process of seeking $1 billion in new funds.

Let’s jump right in with the Mango deal, which is reportedly close to wrapping and will see the company raise $1.5 billion. (Chinese article) I’m admit I’m not completely sure that the figure is US dollars, as the Chinese report doesn’t specify if it’s dollars or Chinese yuan. But the US dollar figure is more consistent with reports last month, which said Mango was seeking to raise up to 20 billion yuan, or about $3.2 billion in its second funding round. (previous post)

Mango is the digital video unit of Hunan Broadcasting, one of China’s most successful and aggressive state-run TV operators. Its background should give it strong chances of success in the emerging world of online video, but it’s relatively late arrival means it is having to play catch-up to more advanced private rivals like LeTV (Shenzhen: 300104), Youku Tudou (NYSE: YOKU) and iQiyi.

According to the latest reports, Mango’s latest funding round attracted 60 potential investors, who collectively had pledged up to 20 billion yuan. Perhaps that’s the source of the 20 billion yuan figure from the original reports, and Mango never really intended to raise that amount, which is quite a large figure for only a second round funding.

Still, the fact is that online video is an expensive business, and also a highly competitive one in China despite its huge potential. iQiyi is already backed by the cash-rich Baidu (Nasdaq: BIDU), which has previously demonstrated it’s willing to incur big losses to build market share for its new businesses. Youku Tudou is likely to follow a similar path, following its sale last month to the equally cash-rich and aggressive Alibaba (NYSE: BABA). (previous post)

The bottom line in this story is that online video is likely to become a bloody battlefield in China for at least the next 5 years, as these well-funded companies all battle for supremacy. That could easily be causing some of Mango’s investors to have reservations about the company, which could explain why the final fund-raising figure was only about half the amount of the amount in the original media reports.

Charles Schwab of China

Next there’s Lufax, which I wrote about earlier this week when reports emerged that it had launched a new $1 billion fund-raising round en route to a potential 2016 Hong Kong listing. (previous post) Now a new report is providing some more color on the aggressive expansion plans by Lufax, which is led by former McKinsey & Co consultant Gregory Gibb and whose largest stakeholder is the Ping An financial services group.

The reports say Gibb hopes to build Lufax into a diversified financial services company that would be the equivalent of US giant Charles Schwab, which offers a wide range of products from traditional banking to brokerage services. (English article) Lufax has currently carved out a place as a leading player in China’s fast-growing P2P lending market that brings together private investors and borrowers over Internet-based platforms.

The company does look like an interesting play, banking on Gibb’s global background and Lufax’s strong ties to China’s state-run banking establishment. All of this comes as Beijing moves to bring more private investment into its financial services sector, which is now dominated by state-run lenders that are currently facing a growing bad debt crisis. Those factors seem to be positioning Lufax as a company to watch, meaning it’s likely to attract strong interest for its upcoming $1 billion fund-raising and big IPO that’s likely to come next year in Hong Kong.

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