Bottom line: Baidu’s shares could see more downside of 5-10 percent as a scandal involving its core search service plays out, but its dominant position means its business is unlikely to suffer a major longer term impact from the crisis.
Baidu ordered to clean up search results
It seems that I was wrong when I predicted that a scandal surrounding search leader Baidu (Nasdaq: BIDU) would quickly blow over and not much would change in the company’s misleading ways for displaying search results. The company is still at the center of major headlines In the second week since the scandal broke, this time getting ordered to change the way it displays search results.
That order was part of a broader set of government directives telling Baidu to change its ways, and other reports indicated the company has already taken down ads from thousands of medical companies. Such moves could theoretically have a major impact on Baidu’s lucrative search business, since hospitals, drug companies and medical device makers reportedly account for a very large part of its advertising revenue. Read Full Post…
Bottom line: The CSRC should take steps to better regulate backdoor listings by Chinese companies privatizing from New York to ensure market stability, but shouldn’t ban the process completely.
CSRC weighs closing backdoor listings
Chinese companies planning to re-list at home after disappointing results with overseas IPOs got some troublesome signals last week, when rumors emerged that China’s securities regulator might be planning to slow or halt a mechanism that has quickly become the preferred route for such homecomings.
That mechanism has seen newly privatized companies make back-door listings using Shenzhen- and Shanghai-traded firms that are often just shells of former state-run enterprises whose own businesses have withered. Returning companies have chosen such a path because conventional IPOs in China have slowed to a crawl due to the regulator’s concerns about market volatility, creating a huge waiting line for new listings. Read Full Post…
The following press releases and news reports about China companies were carried on May 10. To view a full article or story, click on the link next to the headline.
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China Going-Private Targets Extend Selloff on Deal Scrutiny (English article)
Regulator Tells Baidu (Nasdaq: BIDU) to Change Ad Auctioning System (English article)
JD.com (Nasdaq: JD) Announces First Quarter 2016 Results (GlobeNewswire)
Facebook (Nasdaq: FB) Beverages Won’t Be a Thing in China After Rare Trademark Win (English article)
Meituan Cuts Off E-Commerce to Focus on O2O Businesses (Chinese article)
Bottom line: More big global brands are likely to leave a major US anti-piracy group after its admission of Alibaba, which will suffer some negative publicity as it tries to clean up its sites of trafficking in fake goods.
Gucci quits US anti-piracy group after Alibaba joins
How would you feel if your former foe who constantly stole from you suddenly applied for membership in one of your favorite clubs? The answer is “probably not very happy”, which has led luxury goods giant Gucci to abruptly resign from a global anti-counterfeiting group after it admitted Chinese e-commerce leader Alibaba (NYSE: BABA) as its newest member.
This pair of companies have plenty of bad blood between them due to Gucci’s allegations of pirated goods being sold over Alibaba’s popular online marketplaces. Gucci parent Kering has sued Alibaba twice over the issue, most recently a year ago in New York, accusing the Chinese company of knowingly assisting in trade of counterfeit goods over its platforms and profiting from the process. Read Full Post…
Bottom line: Tiger Brokers could see strong growth by banking on Chinese demand for US and Hong Kong stocks, but also faces some risk if Beijing decides to regulate the company as a financial firm.
Tiger Brokers eyes Chinese with appetite for US, HK stocks
I’m kicking off my new series on noteworthy venture-backed companies with the fast-growing Tiger Brokers, which is feeding off a Chinese love of stocks and growing demand for access to overseas markets. In the current climate where China’s own stock markets have become quite volatile and prone to big sell-offs, Tiger’s gateway to the US and Hong Kong stock markets could prove a potent draw to Chinese traders looking to diversify their portfolios with international stocks from more mature markets.
In a small but highly symbolic footnote to this story, Tiger is also finally giving Chinese investors access to many of China’s hottest companies that are traded overseas, including the Internet “big 3” of Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (HKEx: 700). That could ultimately provide some upside for many of those stocks over the longer term, since Chinese investors are likely to boost trading volumes for many of these homegrown companies whose shares previously languished due to lack of familiarity among western investors. Read Full Post…
Bottom line: A flurry of new corporate crackdowns will have the biggest impact on Baidu due to its role in a scandal over false advertising claims, and indicates this year’s summer crackdown season could be hotter than usual.
China cracks down on web merchants, drug makers
Summertime in China is a season for crackdowns, and we’re getting a taste of a potentially hot summer ahead fueled by a high-profile scandal involving false advertising claims on leading search engine Baidu (Nasdaq: BIDU). Three separate crackdowns are in the headlines as we begin the new week, including 2 that look potentially tied to the Baidu scandal.
That scandal consumed China for much of last week, after a student with cancer claimed he was duped into seeking treatment at a hospital that made false claims about its ability to treat his disease. (previous post) In his long list of complaints before he died of his illness, Wang Zexi also accused Baidu of deception for putting the hospital and its inflated claims high in his search results simply because the hospital paid a rich premium for such high placement. Read Full Post…
More than a month after Shanghai launched its campaign to tame our unruly traffic, I want to use this space to call for a similar campaign that is badly needed to clean up our city’s increasingly chaotic sidewalks. Anyone who lives here will know I’m talking about the legions of delivery bikes and scooters that have exploded onto Shanghai’s sidewalks over the last few years, creating a nightmare for those of us who actually use sidewalks for walking.
This particular tale began 5 or 6 years ago with the rapid rise of e-commerce, which spawned a flood of courier services delivering everything from major items like computers and furniture to tiny parcels like USB thumb drives. But the problem has become much worse over the last year with a newer explosion of take-out dining services, which have unleashed thousands more bikes and scooters onto our sidewalks. Read Full Post…
The following press releases and news reports about China companies were carried on May 7-9. To view a full article or story, click on the link next to the headline.
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US Opens Patent Probe Against ZTE (HKEx: 763), Lenovo (HKEx: 992), 5 Others (English article)
Bottom line: Zhaopin’s slight raising of its privatization price could reflect minority investor complaints about undervaluation, while Autohome’s buyout price could rise up to 20 percent in a game of strategic maneuvering with Ping An.
Zhaopin raises buyout price
Minority investors have long complained that a wave of privatization bids for US-listed Chinese companies are grossly undervalued, and now the companies may finally be responding to those grievances. That’s my assessment based on the latest reports that say online recruitment site Zhaopin (Nasdaq: ZPIN) has quietly raised the bid price for its privatization plan, as valuation questions also threaten to derail a similar plan by online car site Autohome (NYSE: ATHM).
Minority investor complaints about undervaluation center on the fact that top managers often control a majority of their companies’ shares through direct and indirect relationships. That means they can choose whatever bid price they want and be assured of its acceptance at shareholder votes. But threats of lawsuits and rival bids, and also perhaps worries about being seen as greedy and unethical are forcing some of the management-led buyout groups to rethink their prices and offer more. Read Full Post…
Some 4 years after disappearing from the headlines, a fourth telecoms carrier formed from China’s numerous regional cable TV companies is finally making a formal debut with its receipt of an official license to offer telecoms services. That means the new company, China Broadcasting Network Co (CBN), could theoretically shake up China’s laggard telecoms services industry that has been monopolized for years by the trio of state-run giants, China Mobile (HKEx: 941; NYSE: CHL), China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA).
But anyone hoping for big change shouldn’t get too excited, since CBN is cut from the same cloth as the existing 3 state-run telcos. What’s more, the new company is likely to be plagued with internal power struggles, at least initially, since it was created from a patchwork of provincial cable TV companies whose former stakeholders may still try to exert some influence. Read Full Post…
The following press releases and news reports about China companies were carried on May 6. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Announces March Quarter and Full Fiscal Year 2016 Results (Businesswire)
Zhaopin (Nasdaq: ZPIN) Announces Receipt of Non-Binding Privatization Proposal (PRNewswire)
China Grants Nation’s 4th Teleco License to New Carrier China Broadcasting Network (Chinese article)
Lenovo (HKEx: 992) Establishes $500 Mln Robotics, AI, Cloud Computing Fund (English article)
Former Autohome (NYSE: ATHM) Executive Denounces Ping An as ‘Cattle Dealer’ (Chinese article)
