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MEDIA: LeEco Tries Real Estate, Draws Regulatory Scrutiny

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Bottom line: Questions about the valuation for its filmed entertainment unit and a new real estate acquisition reflect an increasingly ambitious LeEco, which could cause future problems if some of its decisions turn out to be flawed.

Stock exchange queries LeEco on film unit

Two new headlines are casting a spotlight on the increasingly diverse ambitions of online video giant LeEco (Shenzhen: 300104), led by reports that the company formerly known as LeTV is making a major move into real estate. At the same time, another report involving a potentially inflated valuation for the company’s filmed entertainment unit is casting a spotlight on the murky finances behind LeEco, spotlighting the kinds of financial shenanigans that often take place behind the scenes at many hot Chinese companies.

I’ve been saying for a while now that LeEco looks quite overvalued at its current stock price that gives it a market value of nearly $17 billion. Like many Chinese firms, LeEco mostly puts profitable assets into its publicly traded company and maintains its loss-making units as separate private entities, making it difficult to figure out whether the overall company is making or losing money. Read Full Post…

IPOs: BOC Aviation Draws Big Names, Didi Eyes 2018 Listing in US

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Bottom line: A strong field of cornerstone investors indicates BOC Aviation’s IPO could post moderate gains in its trading debut, while Didi’s IPO plan shows that New York remains an attractive option for Chinese firms that are leaders in their sectors.

Fosun, Boeing buy into BOC Aviation

A couple of major IPOs are in the headlines today, led by some encouraging signs for an upcoming listing from BOC Aviation, the aircraft leasing arm of Bank of China (HKEx: 3988; Shanghai: 601398) that’s in the process of making a $1.1 billion offering in Hong Kong. Meantime, we’re getting some of the first concrete signals of the IPO plans for Didi Chuxing, the homegrown Chinese equivalent of Uber, which is reportedly eyeing a US listing in 2018.

Let’s jump right in with BOC Aviation, which looks like an attractive IPO to me since it should benefit from China’s booming demand for air travel. Yet despite that potential, the offer has stumbled somewhat since Bank of China first announced its plans to make a separate listing for the unit back in March. BOC Aviation was initially hoping to raise up to $1.5 billion, but pared the amount back to the current $1.1 billion after meeting with lukewarm demand due to recent market volatility. Read Full Post…

China News Digest: May 17, 2016

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The following press releases and news reports about China companies were carried on May 17. To view a full article or story, click on the link next to the headline.
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  • Chinese Ride-Hailing Giant Didi Plans US IPO in 2018: Source (English article)
  • Apple (Nasdaq: AAPL) CEO Cook in China, Engages in Banter at Developer Meeting (Chinese article)
  • BOC Aviation IPO Raises $500 Mln from Cornerstone Investors, Set for June Debut (English article)
  • Terex (NYSE: TEX) Sells off Assets to Pave Way for Purchase by Zoomlion (HKEx: 1157) (Chinese article)
  • iDreamSky (Nasdaq: DSKY) Shareholders Approve Going Private Transaction (GlobeNewswire)

SMARTPHONES: Apple Finally Invests in China with $1 Bln Didi Deal

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Bottom line: Apple’s new $1 billion investment in Didi Chuxing is a smart way to show its commitment to China and pursue car-based services, while avoiding intellectual property theft that might come if it set up its own R&D facility.

Apple invests in Didi Chuxing

I’ve been saying for years that Apple (Nasdaq: AAPL) needs to make a major investment in China to show its commitment to the market, but was quite surprised to read it was finally taking such a step with plans to pump $1 billion into local hired car services giant Didi Chuxing. But after some more thought, I realized this particular investment actually has a certain form of logic that I’ll explain shortly. And it also shows Apple’s commitment to the market.

This particular announcement also comes as Apple experiences a sudden series of setbacks in China, following a good streak that saw it do quite well over the last 2 years. Those setbacks were led by Apple’s disclosure last month that its Greater China sales plunged 26 percent in the first quarter of this year. That bad news was followed by the company’s loss in a local trademark dispute involving the iPhone name, and after its China book and movie services were blocked for unspecified reasons. (previous post) Read Full Post…

Shanghai Street View: Medical Manipulation

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Baidu, Beijing hospital at center of medical scandal

A scandal involving leading search engine Baidu (Nasdaq: BIDU) has been making national headlines for much of the last 2 weeks, but a smaller similar story this week in Shanghai showed just how bad the problem of false and misleading advertising claims has become in China. Both cases had their roots in the ultra-competitive medical industry, where hospitals, drug and device makers are constantly boasting of miracle cures and spectacular results for anyone who will listen.

In many ways this particular landscape is reminiscent of the US in the early 20th century, when similar “snake oil salesmen” peddled all kinds of dubious drugs and elixirs that claimed they could cure everything from common colds to digestive ailments. Now it seems that China is going through similar growing pains due to its relatively late arrival into a competitive environment where people have many choices for medical products and services. Read Full Post…

China News Digest: May 14-16, 2016

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The following press releases and news reports about China companies were carried on May 14-16. To view a full article or story, click on the link next to the headline.
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  • Anti-Counterfeiting Group Suspends Alibaba (NYSE: BABA) After Member Outcry (English article)
  • Apple (Nasdaq: AAPL) Invests $1 Bln in Chinese Ride-Hailing Service Didi Chuxing (English article)
  • Stock Exchange Queries LeEco (Shenzhen: 300104) Over Film Unit’s High Value (Chinese article)
  • Qihoo (NYSE: QIHU) Says Going Private Transaction Progressing as Expected (PRNewswire)
  • Fosun (HKEx: 656) Among Bidders for Singapore-Based Reinsurer ACR: Sources (English article)

BUYOUTS: Wanda Wavers, Qihoo Hits Currency Snag

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Bottom line: Qihoo’s privatization from New York is likely to move ahead after it resolves a temporary impasse with the foreign exchange regulator, while Wanda’s privatization is also likely to proceed on its belief it can make a quick backdoor re-listing in China.

Qihoo shares fall on latest buyout obstacle

New ripples are spilling through the realm of Chinese companies seeking to return to China after getting lukewarm receptions with offshore listings, reflecting the complexity and difficulty of such deals. Two of the largest such deals are in the headlines as we round out the week, led by word that a privatization plan by software security specialist Qihoo 360 (NYSE: QIHU) may be running into trouble due to China’s strict foreign exchange controls.  The other major deal has real estate giant Dalian Wanda (HKEx: 3699) reportedly moving ahead with a plan to privatize the company, after indicating earlier this week it might abandon its original plan.

It’s becoming quite a challenge to write about this so-called “homecoming trend” by Chinese firms these past 2 weeks, since new obstacles seem to be popping up almost daily on this road back to China. The process was never an easy one, and involves raising hundreds of millions or sometimes even billions of dollars to take a company private. Then the buyout groups, usually led by company managers, must convince New York or Hong Kong shareholders to sell their stock, often at modest premiums. Read Full Post…

IPOs: BOC Aviation Flies in HK, 51Talk Speaks in NY

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Bottom line: BOC Aviation and 51Talk are likely to post moderate performances in their upcoming IPOs in Hong Kong and New York, as investors welcome their growth stories but also show concerns about China’s broader slowing economy.

BOC Aviation IPO gets lukewarm reception

Privatizations and de-listings have been making headlines among overseas listed Chinese firms these days, but a couple of upcoming new IPOs shows that New York and Hong Kong remain attractive options for at least some companies. In the bigger of the 2 plans in the headlines today, Bank of China’s (HKEx: 3988; Shanghai: 601398) BOC Aviation unit has filed updated plans for its IPO first announced in March, which includes a final pricing. The other deal has English language instruction specialist 51Talk filing to make a New York IPO to raise up to $100 million.

This latest pair of deals in some ways reflect the constant state of uncertainty in China’s own stock markets, which is where many of these Chinese companies would prefer to list due to higher valuations. IPOs in China are always tough because of a huge waiting line that means new applicants can wait 2 or 3 years or even more. The problem is worsened by political conservatism that often sees the regulator slow or freeze all new offerings when markets become volatile like they are now. Read Full Post…

SMARTPHONES: Worried Apple CEO on Damage Control Trip to China

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Bottom line: An upcoming China trip by Apple’s CEO looks hastily arranged and aimed at damage control after several recent setbacks, but won’t stem the company’s recent sales plunge due to intense competition from domestic brands like Huawei.

Apple CEO books hasty trip to China
Apple CEO books hasty trip to China

As the latest China setback for Apple (Nasdaq: AAPL) ripples through the headlines, the global tech giant’s CEO Tim Cook is booking a trip to Beijing to try and halt a growing tide of bad news that has already wiped billions of dollars from his company’s stock. The latest China setback for Apple looks relatively minor, and has local media reporting recent malfunctions and the disappearance of some apps from the company’s China app store.

Those quirks may be an extension of a growing clash between Apple and China’s censors, who a couple of weeks ago shut down the company’s online book and movie services for unspecified violations. (previous post) Since then, Apple has also suffered negative publicity in China after losing a trademark battle involving the iPhone name, and most importantly from a 26 percent plunge in China sales during its latest quarterly report. (previous post) Read Full Post…

NEW ENERGY: Canadian Solar Ups Outlook, Yingli Set for Bond Default

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Bottom line: Canadian Solar’s raised revenue guidance hints at rising prices and could signal upside for the company’s profits, while YIngli’s latest signals may show it’s trying to sell itself to a healthier rival.

Canadian Solar surges, YIngli struggles

The strongest and weakest players from China’s lively solar panel sector are in the headlines today, with superstar Canadian Solar (Nasdaq: CSIQ) and the struggling YIngli (NYSE: YGE) both releasing their latest quarterly results. But whereas Canadian Solar has just announced its financials for this year’s first quarter, including a raised revenue outlook for 2016, Yingli is just now releasing its results for the fourth quarter of 2015.

Most companies typically release their quarterly results within 60 days of the quarter’s end, or 90 days at the very latest. But YIngli’s ongoing struggles have led managers to say several times the company could become insolvent, as it sits on a massive pile of maturing debt that it can’t repay. The latest of that debt comes due today, and Yingli is saying it’s unlikely to make the repayment on time. Read Full Post…

VIDEO: PPTV’s Cryptic Farewell, Xunlei Swings to Loss

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UPDATE: Since issuing its original microblog post, PPTV has issued new posts on its account that appear to indicate it won’t be closing. To view the latest posts, please click here.

Bottom line: PPTV looks set to become the first major victim of China’s online video wars after its microblog publication of a farewell message, while the money-losing Xunlei could become the second casualty.

PPTV bidding farewell?

Two of China’s major online video companies with mid-sized backers are in the headlines today, with ominous signals coming from PPTV and Xunlei (Nasdaq: XNET) that reflect the intense competition they face. The most intriguing headline has PPTV, which is owned by electronics retailing giant Suning (Shenzhen: 002024), announcing on its official microblog that it is closing, even as its actual website remains active.

The other headline has Xunlei, which is backed by smartphone maker Xiaomi, announcing its latest quarterly results that showed it swung to a loss as it battles with much larger rivals for an audience. We can probably also assume that PPTV was losing big money, and in fact just about everyone in China’s online video space is now in the red. Typical of the group is Youku Tudou, the industry leader whose net loss doubled to $70 million in last year’s third quarter before it was bought by e-commerce giant Alibaba (NYSE: BABA). Read Full Post…