Bottom line: Meitu’s shares are likely to price and debut weakly due to skepticism about its profit potential from big western investors, but could perform better over the longer term if the beauty app can monetize its large user base.
Meitu sets IPO price range
What’s likely to be Hong Kong’s biggest high-tech IPO in nearly a decade is creeping ahead, with word that beauty app operator Meitu has set a price range for its widely watched offering that puts it within reach of its target to raise $750 million. But a read between the lines shows that this offering could easily price at the lower end of its range, following earlier investor worries that Meitu might have difficulty leveraging its huge customer base into meaningful profits anytime soon.
Meitu’s quandary is hardly unique, in an Internet universe where having huge user numbers doesn’t always translate to big profits. In this case Meitu, operator of an app that lets users tweak selfies to make themselves look more attractive, is quite rich in terms of traffic, with 450 million active users. But it hasn’t found a way to actually make money from that audience, and instead earns 95 percent of its revenue from sales of smartphones that draw people to its app. Read Full Post…
Bottom line: China’s gaming market remains stubbornly fragmented and unprofitable despite its huge potential, with no clear signs of much-needed consolidation coming anytime soon.
Gamers continue to struggle
As much of China bakes under a summer heatwave, a major trade show this week in Shanghai is casting a different spotlight on the overheated state of the nation’s gaming industry. One report is saying that only 2 percent of companies in the emerging mobile gaming space can generate big profits, and the situation may not improve anytime soon due to a stubborn state of fragmentation.
The problem has led many of China’s US-listed gaming companies to launch privatization drives over the last 2 years, including Giant Interactive, a large but decidedly second-tier player that de-listed a year ago. Giant’s talkative chief Shi Yuzhu is blaming US investors for failing to appreciate his company, with the latest reports saying he thinks Chinese stock buyers will value his firm at more than 5 times what it was worth when it de-listed from New York. Read Full Post…
Bottom line: China Mobile Games could be combined with Shanda Games if buyouts for the 2 companies succeed, followed by a re-listing in China that could gain strong interest from local investors.
China Mobile Games joins de-listing queue
The latest news that China Mobile Games (Nasdaq: CMGE) has received a buyout offer won’t surprise anyone, as it becomes the latest New York-listed Chinese Internet firm to receive such a bid due to its low valuation. What does come as a slight surprise is investor reaction to the bid, which saw China Mobile Games’ share price drop to well below the offer price. The could reflect some skepticism about the quality of this particular bid, which is coming from a Chinese securities brokerage.
This deal marks the latest in a long string of similar buyouts for US-listed Chinese firms whose shares have often languished in New York due to lack of interest from western investors who are unfamiliar with these names. Many of the companies are eying quick re-listings in their home China market, where they believe they can get valuations that are as much as double what they were worth in New York. Read Full Post…
Bottom line: The new purchase of 3 smaller rivals by Ourpalm could position the company as a consolidator for China’s fragmented gaming sector, and could be followed by one or more similar purchases in the next year.
Ourpalm buys 3 smaller rivals
A newly announced deal will see online game operator Ourpalm (Shenzhen: 300315) combine with 3 smaller rivals in a relatively large deal that could lay the foundation for a major new player to drive much-needed consolidation in the space. The new company looks interesting for a number of reasons, including Ourpalm’s existing connection with leading movie maker Huayi Bros, which could become an important strategic partner for the company.
Ourpalm could also become a strong platform to absorb some of the smaller Hong Kong- and New York-listed gaming companies that have struggled for investor attention due to stalling profit and revenue growth caused by their lack of scale. Potential players for future tie-ups could include recently listed Hong Kong players like Linekong (HKEx: 8267) and Forgame (HKEx: 484), or New York-listed Sungy Mobile (Nasdaq: GOMO), whose shares have all languished since their IPOs. Read Full Post…
In the absence of big company news so far this week, I’ve decided tolook at the scorecard for the flood of technology IPOs over the last 12 months and what it might say about what’s ahead into next year. The record so far looks quite good in general, especially for companies that made a flurry of New York offerings at the end of last year and whose shares have mostly doubled or more since then.
But one notable exception to the trend is mobile games, as 2 of the 3 major players to make recent listings are now squarely in negative territory. That doesn’t bode well for a 3 upcoming similar listings, 1 in New York and 2 in Hong Kong, which appear to be stalling due to the cool investor sentiment. Read Full Post…
Much of the world is fixated on the upcoming IPO of e-commerce giant Alibaba in New York, but a far smaller new listing plan by mobile game developer Feiyu Technology is shining a low-key spotlight on a recent jump for such listings in Hong Kong. Many have said that Hong Kong should be the most attractive offshore listing ground for Chinese venture-backed IPOs, since the former British colony is closer geographically and culturally than the currently favored site of New York. But strict listing rules on profitability and ownership structure have kept most Chinese venture-backed tech firms looking to New York instead. Read Full Post…
The latest headlines about an upcoming IPO for online game operator Linekong made me realize it’s been quite a while since we last saw any news of offshore listing plans by Chinese Internet and tech firms. Such listings were coming nonstop earlier this year, and saw a wide range of names including the Twitter-like Weibo (Nasdaq: WB), e-commerce giant JD.com (Nasdaq: JD) and real estate services site Leju (NYSE: LEJU) all make IPOs in New York. But the Internet IPO pipeline has gone largely silent since early August, when mobile game operator iDreamSky (Nasdaq: DSKY) made its trading debut. Read Full Post…
Separate reports about a new IPO by one company and potential exit from the Nasdaq by another are reflecting the mixed feelings that Chinese firms have for New York, where public listings can bring both prestige and also headaches. In the new listing category, media are reporting that yet another mobile game developer called iDreamSky has just made its first public filing for a New York IPO to raise up to $110 million. Meantime, other media are reporting that veteran online travel service eLong (Nasdaq: LONG) could be gearing up for a buy-out by much larger rival Ctrip (Nasdaq: CTRP). Read Full Post…
Big stock moves for veteran online travel agent eLong (Nasdaq: LONG) and newly listed mobile game firm Ourgame (HKEx: 6899) are shining a spotlight on the need for consolidation in many of China’s online sectors, where these smaller players lack the resources to thrive over the longer term. Shares of eLong suddenly soared more than 20 percent in the latest session on trading volumes not seen for years, which will inevitably lead to speculation of a looming buyout offer. Meantime, Ourgame shares tanked 17 percent on their first trading day in Hong Kong, as investors yawned at the chance to buy into yet another mid-sized Chinese gaming firm. Read Full Post…
Hong Kong has always been a distant second to New York for Chinese technology stocks, which prefer more mature US investors to a less predictable environment in Asia. But the market could be quietly gaining some important momentum in the gaming space, with word of 2 new listing plans from the sector. The first of those has game developer Ourgame filing for a listing to raise up to 750 million yuan ($120 million) in Hong Kong, while the latter has media reporting that privatizing Giant Interactive (NYSE: GA) may also be eying a listing in the former British colony. Read Full Post…
Techies have been buzzing about the huge potential of the mobile Internet for much of the last 2 years, but the latest headlines from social networking (SNS) giant Tencent (HKEx: 700) and recently listed mobile game developer Sungy Mobile (Nasdaq: GOMO) show the space is still rife with growing pains. Tencent is discovering that its wildly popular WeChat mobile messaging service is attracting not only hundreds of millions of legitimate users, but also masses of spamsters and scam artists and is trying to clean up the platform. Meantime, Sungy has just announced quarterly results that might look good for a company in any other space, but were clearly a disappointment for investors who were looking for meteoric growth. Read Full Post…
