A day after leading group buying site LaShou formally scrapped its New York IPO (previous post), there’s an interesting detailed report out about the ongoing merger between 2 group buying sites backed by Tencent (HKEx: 700), China top Internet company. But what’s more interesting to me than the actual report of this ongoing merger is the potential for the cash-rich Tencent itself to emerge as a key consolidator in the ongoing clean-up of the unruly group buying space, perhaps even making a play for LaShou itself as that company struggles for survival.
Tag Archives: 55tuan
Tencent Shakes Up Search, Group Buying 腾讯搜搜、高朋网巨
Layoffs and resignations are the main story at Tencent (HKEx: 700) these days, with the head of the company’s group buying joint venture reportedly resigning as China’s Internet leader also makes large job cuts at its Soso search engine. Both of these developments should come as a surprise to no one, and reflect an ongoing consolidation gripping the overheated group buying space in the former case, and a rapidly slowing advertising market in the latter. Let’s look at the group buying situation first, which has reportedly seen the CEO resign at Gaopeng, the 1-year-old group buying joint venture between Tencent and global sector pioneer Groupon (Nasdaq: GRPN). (English article) In fact, Gaopeng has struggled almost from the start due to its relatively late arrival to China’s group buying space, which is now in the midst of a painful consolidation. Reports of mass layoffs at the company began to emerge as early as last summer, and rumors that the company may actually close or merge with another partner continue to bubble up from frequently, with one such report emerging just weeks ago. (previous post) Gaopeng is hardly alone in this sector-wide crisis, which has started to hit even the industry’s largest players. Late last week reports emerged that a number of top managers had resigned at LaShou, in the latest sign of trouble for the industry’s leader that is facing a major cash crunch. (previous post) Others that have shown signs of major distress include 55tuan, as well as Groupon.cn, a homegrown Chinese player that is no relation to the US Groupon. Meantime, Tencent also appears to be scaling back its plans for Soso, its search engine that it hoped would compete with industry titan Baidu (Nasdaq: BIDU) for a share of China’s lucrative market. (English article) The reports are relatively vague, saying simply that Tencent was wavering on whether to sharply reduce the size of the 6-year-old Soso, which employs about 1,300, or to simply close it altogether. In the end it decided on the cutbacks, which will begin when people returned from the May Day holiday, according to the reports, citing an unnamed industry source. This latest move spotlights not only the strong grip that Baidu has on China’s online search market, with more than 70 percent share, but also the fact that the online search sector is also on the cusp of a major slowdown, fueled in part by the loss of advertising revenue from struggling companies like Gaopeng. The advertising slowdown led Baidu to report disappointing results last week, and earlier this week Sohu (Nasdaq: SOHU) also reported a sharp slowdown in the growth of its own online search site, Sogou. (previous post) Look for the painful retrenchment to continue in the group buying space, and for the advertising slowdown to sharply hit the top line of search engines and other companies that depend on such revenues in the months ahead. As the situation deteriorates, I wouldn’t be surprised to see Tencent shutter either Gaopeng or Soso, or possibly both, by the end of the year and quite perhaps much sooner.
Bottom line: Shakeups at Tencent’s online search and group buying units reflect broader industry malaise for both, with one or both units set for potential closure by the end of the year.
Related postings 相关文章:
◙ LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择
◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速
55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速
Just a day after writing about a rumored merger between 2 mid-sized group buying sites, we’re getting even bigger news that the long-awaited consolidation in the overcrowded space is accelerating with word that 55tuan, one of the industry’s top players, is taking over operation of the group-buying business of a major player called Ganji. (Chinese article) The first tie-up that I wrote about yesterday has Gaopeng, the joint venture of US group buying giant Groupon (Nasdaq: GRPN), reportedly in talks to merge with another mid-sized player called FTuan, in a deal that is probably being brokered by leading Internet firm Tencent (HKEx: 700), which is a shareholder in both companies. (previous post) This kind of consolidation, which will include both mergers and also a large number of closures, has been a long time coming, and 55tuan’s entry to the picture marks the first such M&A by one of the industry’s top 3 players. I predict we’ll see the industry’s other top 2 names, LaShou and Dianping, announce their own new tie-ups in the next 2-3 months, with LaShou likely to make the first announcement as it tries to create hype for its moribund New York IPO, which it originally filed for last year but later had to put on hold while it cleared up some accounting issues from the US securities regulator. (previous post) Let’s take a look at the latest news first, which has Ganji, a mid-tier group buying player, confirming it has formed a strategic partnership that will see it and 55tuan combine their group buying operations. Since 55tuan is clearly the bigger player and both companies are probably losing big money, I suspect this so-called “strategic agreement” will ultimately turn into an outright sale that will see 55tuan completely take over the Ganji group buying business for a modest fee of $100 million or less. 55tuan itself has said it wants to make its own overseas IPO, and reiterated as recently as last month that its listing plan is still on track for sometime later this year. (previous post) This tie-up with another mid-sized player like Ganji should help to generate some investor interest in 55tuan’s offering if and when it happens, and 55tuan is undoubtedly negotiating with other similar mid-sized players about more M&A even as it wraps up the Ganji deal. This new flurry of activity could be just the tonic the battered group buying space needs to generate some interest in this upcoming parade of planned IPOs, as investors will undoubtedly be excited at the prospect that the ultra-fierce competition that has gripped the market for the last year may soon come to an end and a handful of major companies with potential to be profitable will emerge. To that end, look for both more mergers and closures to come in the next few months, and perhaps for even some investor enthusiasm to emerge if and when 55tuan, LaShou, or another big group buying site manages to finally make a public offering.
Bottom line: The new merger between the group buying business of 55tuan and Ganji marks an acceleration of consolidation that could rekindle investor in the overheated space.
Related postings 相关文章:
◙ Gaopeng, FTuan Lead Group Buying M&A 高朋网和F团或引领中国团购业并购潮
◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合
◙ 55tuan Restarts IPO Race With LaShou 窝窝团和拉手网重启IPO争先赛
News Digest: April 12, 2012 报摘： 2012年4月12日
The following press releases and media reports about Chinese companies were carried on April 12. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ China Auto’s (NYSE: CARH) April 26 IPO to Raise Up to $158 Million (Chinese article)
◙ UnionPay Profit Breaks 1 Bln Yuan, Up 10-Fold Over 4 Years (Chinese article)
◙ Ganji, 55tuan to Combine Group Buying Operations (Chinese article)
◙ People’s Daily Online Kicks Off IPO Roadshow (English article)
◙ AutoChina (OTC: AUTCF) Responds to SEC Lawsuit, Believes Claims Without Merit (Businesswire)
◙ Latest calendar for Q4 earnings reports (Earnings calendar)
Gaopeng, FTuan Lead Group Buying M&A 高朋网和F团或引领中国团购业并购潮
Finally there’s a rumored merger in China’s overheated group buying space that looks smart, with Groupon’s (Nasdaq: GRPN) struggling joint venture Gaopeng reportedly in talks to combine with another struggling firm called FTuan. (English article) Such mergers are sorely needed in the group buying space, where nearly everyone is losing money due to rampant competition and quality control problems are leading to growing signs that Beijing will step in to heavily regulate this unruly industry. According to the reports, citing an unnamed industry source, Gaopeng, a joint venture between Groupon and Chinese Internet leader Tencent (HKEx: 700) is negotiating a merger with FTuan, though no deal has been reached yet. This deal is no doubt being brokered by Tencent, which invested $30 million in FTuan last year, making it a stakeholder in both Gaopeng and FTuan. (English article) I won’t even ask why Tencent decided to invest in another group buying site just months after launching Gaopeng with Groupon, in what must have looked like a clear conflict of interests at the time. But regardless of the background, this combination, if it happens, looks like a smart move for both companies and the broader group buying space where many players are struggle to stay in business as they burn through their cash piles and investors refuse to provide more money. Gapeng itself began mass layoffs just months after its launch early last year, and it’s unclear how committed Groupon is to the venture, especially as Groupon itself comes under scrutiny after saying it will restate some of its financial information following its Nasdaq IPO last year. We don’t know very much about FTuan, but previous media reports indicate the company has received around $100 million in funding to date, including the $30 million from Tencent, meaning it should be a relatively large company whose scale is comparable to Gaopeng’s and thus should make it a meaningful merger partner. Honestly speaking, I’m surprised we haven’t seen more such merger talks these last few months, but perhaps that’s not surprising in China’s entrepreneurial Internet space where many bosses might prefer to simply see their firms go out of business rather than merge with a rival. One such company that looks headed in that direction is Groupon.cn, unrelated to the US Groupon or Gaopeng, which has reportedly cut most of its staff after it used up most of its cash and investors refused to provide more. (previous post) Another company that could probably benefit from a big merger is LaShou, whose New York IPO derailed last year after regulators reportedly had questions about its accounting. My sources tell me LaShou is reportedly preparing to file again for the IPO, but it could certainly improve its chances and even create some investor excitement if it were to merge with another major Chinese player first, such as 55tuan. Look for more of these mergers to come in the months ahead, along with a steady stream of closures by cashless companies, with a few interesting players likely to emerge in a much steadier consolidated industry by the end of this year.
Bottom line: Gaopeng’s rumored merger talks with FTuan are the first of what will be many mergers and closures for group buying sites this year, with consolidation likely to wrap up by year end.
Related postings 相关文章:
◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合
◙ Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100
◙ Group Buy Clean-Up Grows, E-Commerce Next 团购行业洗牌加剧，下一个是电子商务
Dangdang Cuts Back in Latest Internet Distress Sign 当当网战略收缩
I’ll close out the week with the latest trouble signs for China’s overheated Internet sector, where Dangdang (NYSE: DANG), the country’s lone major listed e-commerce company, is starting scale back some of its operations to save money. Media are reporting on the cutbacks as separate newly released data is showing just how badly bloated the sector became last year, when a flood of new money gushed in from investors buying into the hype of China’s Internet growth story. Let’s look at Dangdang first, as the company is showing all the signs of becoming the latest victim to feel the pinch of super-heated competition in the e-commerce space, where it competes with big names like 360Buy, also known as Jingdong Mall, as well as online retail sites invested and operated by other global giants like Wal-Mart (NYSE: WMT) and Amazon (Nasdaq: AMZN). The latest media reports quote Dangdang CEO Li Guoqing saying his company is initiating a “strategic pullback” in its geographic coverage, in a bid to lower its transport costs. (English article) Li added his company will put more focus in the future on its VIP customers, who obviously offer better returns than the mom-and-pop buyers in smaller cities that are far more expensive to serve. His comments come after Dangdang swung squarely into the red in its latest reporting quarter, posting a net loss of nearly $21 million after earning a $2 million profit in the year-ago period. (previous post) Hyper competition in the e-commerce space is partly the result of a massive influx of money last year that saw both domestic and foreign investors pump tens of billions of dollars into start-ups and larger companies like 360Buy, which made headlines last spring when it received more than $1 billion in new funds. New data just released by venture capital tracking firm Zero2IPO shows venture capital and private equity firms, who tend to focus on start-ups with smaller investments of $1-$10 million, pumped a record $5.8 billion into young Chinese firms last year, with Internet companies emerging as the clear favorites as 276 such companies received $3.3 billion in new funds — a 3.6-fold rise over the previous year. (English article) Those figures only reflect the smaller investments that Zero2IPO tracks, but other firms like group buying sites Dianping and 55tuan received much larger sums in the hundreds of millions of dollars, truly bloating the sector. One executive at Groupon.cn, another group buying site unrelated to US giant Groupon (Nasdaq: GRPN) summarized the current situation nicely in a recent interview, saying the investors who once fawned on all these Chinese Internet companies have suddenly lost their appetite to provide new funds due to concerns of a bubble, causing companies like his to make mass layoffs just to survive. Dangdang seems big enough to survive this bubble in the long term, but look for more short-term pain at Dangdang and just about everyone else in the e-commerce and group buying spaces for the rest of this year and possibly into 2013 until the bubble finally finishes bursting.
Bottom line: Dangdang’s business scaleback and new investment data from 2011 are the latest reflections of last year’s China Internet bubble, whose bursting is starting to accelerate.
Related postings 相关文章:
◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职
◙ Mid-Sized Firms Suffer First In Internet Bubble Burst 中国互联网泡沫破裂
◙ Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊
Group Buy Clean-Up Grows, E-Commerce Next 团购行业洗牌加剧，下一个是电子商务
Growing signs are emerging that the much-needed clean-up of the overheated group buying space is well underway, with domestic media reporting a massive closure of websites in January alone, as the stalled IPO for industry leader LaShou remains nowhere to be seen. According to the domestic reports, some 117 group buying sites shut down in January, although the space still remains crowded with nearly 3,800 players still in operation. (Chinese article) Reflecting the cutthroat competition that still remains, other media reports are saying the government regulator has stepped in and limited the size of discounts on movie tickets, in the latest of a string of such moves that look designed to cool down the sector, despite cries of protest from group buying sites themselves. (English article) The latest wave of closures at mostly smaller sites follows a string of layoffs at much larger names like Gaopeng, the joint venture between global leader Groupon (Nasdq: GRPN) and Tencent (HKEx: 700), and Groupon.cn, which is unrelated to the US company. But perhaps the biggest sign of trouble has come from sector leader LaShou, which, like most other players in the space, was reportedly bleeding cash when it filed for a New York IPO last year, only to see the offering indefinitely delayed when regulators reportedly questioned some of the company’s accounting methods and asked for more information. (previous post) A couple of Chinese Internet companies have filed for New York IPOs already this year (previous post), but LaShou’s offering seems to have completely disappeared, with no news on what’s happening since the first reports of trouble first emerged in November. Rival 55tuan has also said it is going ahead with its own planned IPO, but I would be surprised to see that offering go forward until the second half of the year at earliest, if at all. Meantime, the big questions are: who will be the first big victim in the space to close shop; and who is next? In answer to the first question, the situations at Groupon.cn and Gaopeng both sound quite dire, based on the media reports, and I wouldn’t be surprised to see one of them become the first big victim of the cleanup. For the second question, the next big space in big need of a cleanup is clearly e-commerce, where competition has also grown rampant over the last year and most players are reportedly bleeding cash. Dangdang (NYSE: DANG), one top player, reported a large and widening quarterly loss last week (previous post), and news reports regularly appear about the latest company to lay off employees and close shop. Look for the e-commerce cleanup to accelerate in the year ahead, with more layoffs and the closure of one or more larger players likely as well.
Bottom line: The cleanup of the online group buying sector is picking up pace and should peak around mid-year, with e-commerce following close behind.
Related postings 相关文章:
◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合
◙ Group Buying Turmoil Grows With 55tuan Layoffs 窝窝团撤站裁员 团购业整合在即
55tuan Restarts IPO Race With LaShou 窝窝团和拉手网重启IPO争先赛
An IPO race pitting 2 of China’s top group buying sites, LaShou and 55tuan, is showing signs of restarting in the Year of the Dragon, though I’m still a bit dubious of whether either of these 2 companies will ever really make it to market. New reports in the Chinese media say 55tuan is denying rumors that it has scrapped plans for a New York IPO, saying it is moving forward with a timetable for an offering in the second quarter. (Chinese article) The denial marks the latest twist in a race that started to take form last summer, when both 55tuan and LaShou appeared to be moving ahead with plans for offerings to raise much-needed cash. Both companies had trouble finding underwriters for their offerings, with names like Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) resigning from LaShou’s plan (previous post), while Credit Suisse (NYSE: CS) and Merrill Lynch reportedly declined to bid for the 55tuan deal. (previous post) All the big banks were reportedly concerned about the accounting used by both companies for some of their many acquisitions, amid a broader series of accounting scandals that hammered US-listed Chinese stocks last year. LaShou ended up hiring several second tier-players, including domestic heavyweight CICC and Japan’s Nomura; but one of my sources tells me that even Nomura ended up dropping the deal and was replaced by Britain’s Barclays Capital. LaShou appeared to have the edge in the race when it made its first public IPO filing last fall, but then saw that plan derail after the US securities regulator grew suspicious and asked for more information. (previous post) That happened in November and we haven’t heard anything since then, leading me to believe that the plan could be delayed indefinitely while LaShou does some major reworking of its books to satisfy both regulators and its own underwriters. In the meantime, I’m also skeptical that 55tuan will really make a second-quarter IPO, as it is having its own problems in the highly competitive group buying space that saw it make mass layoffs last year. Turmoil in the space appeared to claim its latest victim earlier this week when Groupon.cn, which has no relation to US giant Groupon, reportedly put most of its employees on extended holiday after the Chinese New Year break. (previous post) At the end of the day, one or both of these companies could finally make it to market, but both would be well advised to wait until the end of the year when they can generate more excitement — if they have the financial resources to survive that long.
Bottom line: A second-quarter IPO timetable for group buying site 55tuan looks overly ambitious, and an offering closer to the end of the year looks both more prudent and realistic.
Related postings 相关文章:
◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合
News Digest: February 1, 2012 报摘： 2012年2月1日
The following press releases and media reports about Chinese companies were carried on February 1. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ Citron Continues Qihoo 360 (NYSE: QIHU) Attack, Qihoo Says Won’t Engage Verbal War (Chinese article)
◙ New Internet Map Rules to Take Effect, Google (Nasdaq: GOOG) Still Awaiting Approval (Chinese article)
◙ Lawmakers Press Obama on China Auto Parts (English article)
◙ China Telecom (HKEx: 728) Reportedly to Establish Cloud Computing Subsidiary (English article)
◙ 55tuan Says IPO Moving Ahead on Schedule, No Plans to Change Underwriter (Chinese article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合
While recently listed Groupon (Nasdaq: GRPN) struggles with a tough group buying market in its US home base, one of its Chinese copycats, Groupon.cn, may be facing an even grimmer future as a much-needed cleanup of the ultra-competitive China market continues. Chinese media are reporting that Groupon.cn, which has no relationship with the US Groupon, has told most or all of its staff to stay on extended vacation following the end of the weeklong Chinese Lunar New Year holiday that ended on Sunday. (Chinese article) It also says a group of Groupon.cn’s partners are preparing to sue the company, presumably because it failed to pay them for their products that it offered for sale on its group buying site. Groupon.cn has denied the reports through a Weibo microblog posting, saying all of its activities have returned to normal since the end of the Lunar New Year holiday. Of course it’s possible the Chinese media reports are exaggerated, but I’m inclined to believe there’s at least an element of truth to them considering the disarray and rampant competition in the China’s group buying space. Gaopeng, the group buying joint venture between the real Groupon and Chinese Internet giant Tencent (HKEx: 700), struggled during most of its first year of business last year, laying off hundreds of employees in the process. (previous post) Meantime, LaShou, China’s largest group buying site, is in the midst of trying to make a New York IPO that is showing few if any signs of moving forward after the securities regulator asked for more information, reportedly over concerns about some of its accounting. (previous post) Other signs of turmoil also emerged in the second half of last year, including layoffs at another top player 55tuan, giving this latest report about problems at Groupon.cn even more credibility. I would look for more headlines on this company once the situation becomes clearer, as it won’t be able to hide massive layoffs for too long if they really are happening. Perhaps the company will even sell itself to a rival, though such deals are relatively rare in China due to the big egos of bosses who hate to give up control of their businesses. Meantime, this development looks like the latest sign of distress for an overheated industry that is set for a major clean-up in 2012.
Bottom line: Reports of woes at Groupon.cn mark the latest phase in a cleanup for China’s overheated group buying space, which will see a major acceleration this year.
Related postings 相关文章:
◙ Latest Group Buying Turmoil Shows Up at 24quan, Meituan
◙ Lashou Files For IPO, Launching Race With 55tuan 拉手网与窝窝团打响IPO竞争战
Latest Group Buying Turmoil Shows Up at 24quan, Meituan
It’s Thanksgiving day in the US, but people in China’s turbulent group buying sector have little to be thankful for, as intense competition appears to have claimed a new victim in the form of a sub-site operated by 24quan. (Chinese article) According to Chinese media reports, the sub-site, called Zhongshan Zhan, has suddenly shut down and its merchants are refusing to honor its coupons. I checked 24quan’s main website (www.24quan.com), and it appears to be still functioning normally, so this report appears a bit unclear about what’s really happening at the parent company. But regardless of the specifics, this latest report, which cites a number of irate customers, reflects the current turmoil afflicting China’s group buying space, where consumer complaints are frequent and companies are bleeding cash. Industry leader LaShou’s pending New York IPO appears to be indefinitely suspended, as the US securities regulator looks into accounting issues (previous post), and there’s no sign that 55tuan, another major player, will be able to make its intended US IPO before the end of this year. (previous post) Another new media report reflecting the current chaos says that a site called Meituan has suddenly started offering all employees who have worked there for 6 months or more stock options. (English article; Chinese article) The company apparently denied the move was related to an upcoming IPO, which doesn’t surprise me. I suspect the move instead means something entirely different, namely that Meituan is worried about its own finances and is using these options as a way to retain employees who might be worried that their company might not survive long enough to make those options worth anything. The report says the options don’t vest until 4 years — which looks like an eternity in the current market. I would honestly be surprised if more than 10 percent of the current crop of group buying companies are still in business 4 years from now, and I’m guessing that Meituan won’t be among that small set that survives the upcoming industry clean-up which should begin in earnest in the next 6 months.
Bottom line: Reports of the shut-down of a unit of one popular group buying site and option awards at another are the latest signs of turmoil, which will result in an industry shake-up very soon.
Related postings 相关文章:
◙ Latest Group Buying Confusion Shows State of Chaos
◙ LaShou Shifts Focus in IPO March 拉手网在上市准备中有意转变战略方向
◙ Lashou Files For IPO, Launching Race With 55tuan 拉手网与窝窝团打响IPO竞争战
