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…
Bottom line: Alibaba’s spin-off of its C2C marketplace for second-hand goods could reflect a new trend for big Internet firms to separately run individual assets, while LeTV may have provided most of the money in the first funding round for its smartphone unit.
Taobao spins off Xianyu
A couple of fund-raising headlines are spotlighting emerging trends in China, including a nascent move by big companies to spin off smaller units as separately run and funded entities. That move was center stage in new reports that e-commerce juggernaut Alibaba(NYSE: BABA) is spinning off its Xianyu marketplace that specializes in sales of second-hand goods between consumers.
The second headline comes from online video high-flyer LeTV(Shenzhen: 300104), and spotlights a trend that shows rapidly cooling investor sentiment towards overheated sectors like video and smartphones. That news has LeTV declining to name any of the backers in the first funding round for its fledgling smartphone unit, hinting that no serious investors were interested in this particular opportunity that raised $530 million. Read Full Post…
A brewing spat between security software giant Qihoo 360 (NYSE: QIHU) and struggling smartphone maker Coolpad (HKEx: 2369) has provided some good entertainment for followers of China’s vibrant Internet sector over the last few weeks. The tale has all the elements of a good trashy romance novel, including a love triangle and vengeful scheming by China’s most famous Internet bad-boy.
But more fundamentally, the tale is also filled with valuable lessons for anyone doing business in China’s high-tech sector, or really in any of the country’s emerging industries where private entrepreneurs are driving the growth. The story’s biggest moral is to be careful when choosing your business partners – a lesson that many private investors have learned over the last 3 decades as China transforms from a socialist system to a market-oriented economy. Read Full Post…
Bottom line: Qihoo’s latest move forcing Coolpad to buy-out their joint venture could be a bargaining tactic to pressure Coolpad into ditching a separate tie-up with LeTV, and could spark a bidding war for Coolpad by Qihoo and LeTV.
Bidding war brewing for Coolpad?
Smartphone maker Coolpad (HKEx: 2369) has become a bit of a hot potato lately, though it’s not clear if the company is hot property or a pariah these days. The company was one of China’s earliest smartphone makers, and quickly built up share as a leading name in its fledgling home market. But rampant competition as others piled into the market hurt its prospects, prompting it to form a major equity tie-up with security software maker Qihoo (NYSE: QIHU) last December, and then with online video firm LeTV (Shenzhen: 300104) last month.
The LeTV tie-up surprised many, and led Qihoo feeling betrayed. Now Qihoo, whose equity tie-up came in the form of a joint venture, appears to be seeking revenge for that betrayal. In its latest move to express its outrage, Qihoo has just announced it will exercise a non-compete option in their agreement that will force Coolpad to buy out their joint venture at double the current market value. Read Full Post…
Bottom line: Qihoo could drop its privatization plan and launch a buyout offer for Coolpad, in a bid to protect its joint venture with Coolpad and stop a rival offer for the company from LeTV.
Bidding war shaping up for Coolpad?
A new media report is detailing an intriguing behind-the-scenes clash taking place between security software specialist Qihoo 360 (NYSE: QIHU) and online video company LeTV (Shenzhen: 300104), with big stakes involved for both sides. If the report is true, Qihoo is quickly finding itself in a difficult position that could end with collapses for its recent privatization bid or its joint venture partnership formed late last year with smartphone maker Coolpad (HKEx: 2369).
The clash is pitting 2 of China’s highest-profile Internet executives against each other, with Qihoo’s outspoken CEO Zhou Hongyi coming under a surprise attack from younger rival LeTV CEO Jia Yueting. In this case it appears Zhou may soon have to choose between going forward with his plans to privatize Qihoo, or abandon that plan and instead mount a counter-offensive to prevent LeTV from making a bid to take control of Coolpad. Read Full Post…
Bottom line: LeTV’s shares are probably overvalued despite a recent sell-off, but the company still looks like a good long-term bet despite allegations that it may overstate some of its sales and financial data.
LeTV shares hit turbulence
Online video superstar LeTV (Shenzhen: 300104) is quickly learning the lessons of gravity, as its formerly surging shares have suddenly shifted into reverse amid claims of unusual accounting and a big share sale by its CEO. Anyone who has owned the stock over the last 52 weeks is still doing quite nicely, with the shares more than double from a year ago at their current price level.
But anyone who bought LeTV shares amid a wave of euphoria that began in April might be doing less well. That wave saw the shares more than double in just a month’s time, making the company the undisputed leader in China’s online video space, well ahead of former leader Youku Tudou (NYSE: YOKU). But since reaching a peak in May the shares have lost about a third of their value, and it’s quite possible we could see quite a bit of downside ahead for this overinflated stock. Read Full Post…
Bottom line: Xiaomi’s latest moves and remarks reflect attempts to rekindle its fading momentum, as its growth slows and it faces a rising challenge from LeTV and a resurgent Apple.
Xiaomi battles slowing momentum
Sputtering smartphone sensation Xiaomi is in a flurry of headlines as we go into the weekend, spotlighting the recent challenges it is facing as it tries to maintain its breakneck growth and live up to huge expectations it created for itself. The most revealing of those portrays Xiaomi’s charismatic chief Lei Jun in a rare defensive posture, at a company event where he took aim at the increasingly threatening LeTV (Shenzhen: 300104).
The second headline comes from the same event, and boasts of Xiaomi’s heavy spending on content for its online services over the last 2 years, again taking aim at LeTV. Lastly there’s the news that US chip giant Qualcomm’s (Nasdaq: QCOM) China chief has jumped ship to take up an executive position at Xiaomi. Again, this looks like Xiaomi’s attempts to portray itself as a hot company that can still attract top talent away from leading western companies. Read Full Post…
Bottom line: LeTV’s plans to raise new funds at a big discount and for its CEO to sell a big block of his shares reflect their belief that the company’s stock has become overvalued and could be due for a correction.
LeTV plans private placement
Online video superstar LeTV (Shenzhen: 300104) is in a couple of headlines that reflect the recent meteoric rise of its stock, with word that it’s planning a major new share placement as its CEO gets set to sell a big chunk of his shares in the company. Both news bits come amid a rally that has seen LeTV shares soar 5-fold since the start of this year, amid a broader huge rally for China’s stock markets. They also come as LeTV embarks on a major expansion that will take it beyond its core video products into a range of new areas including smartphones and smart cars. Read Full Post…
Bottom line: LeTV’s smartphone gamble, based on relatively cheap phones tied to its video services, could succeed despite tough competition if its newly launched models get positive reviews.
LeTV launches smartphones
Online video sensation LeTV (Shenzhen: 300104) is all over the tech headlines this morning, with the formal launch of the first 3 models for its previously announced foray into smartphones. The company is taking a page from its successful business model with smart TVs, once again selling what it’s billing as a relatively high-end product for low prices in a bid to attract customers to its core paid video services.
LeTV’s biggest problem will be finding an audience for these models, as it’s quite late to the smartphone game. That fact is being underscored by new industry data that shows China’s cellphone market contracted 5 percent in March, amid growing signs of saturation due to stiff competition. Read Full Post…
Tech executives welcomed in the New Year with some intriguing hints on their microblogs, with posts suggesting major new moves in China from global media titan News Corp (Nasdsaq: NWSA) and online video operator LeTV (Shenzhen: 300104). In the former case, a local tech executive posted a photo of himself meeting with Rupert Murdoch in China, indicating the News Corp chief was back doing business in the country after a long absence. In the latter case, LeTV chief Jia Yueting was hinting that his company could soon become the latest Chinese Internet firm to enter the overheated smartphone market. Read Full Post…
Bottom line: LeTV’s new tie-up with Microsoft is mostly empty talk that’s unlikely to produce any meaningful results, and is part of a recent campaign to divert attention from problems at the company’s core business.
LeTV, Microsoft in cloud video tie-up
After several months out of sight while he received medical treatment, the charismatic CEO of online video company LeTV (Shenzhen: 300104) has come roaring back into the spotlight with a series of new initiatives to boost investor confidence and show he still has a long-term vision for his company. The latest of those has LeTV teaming up with software giant Microsoft (Nasdaq: MSFT) in a global alliance to operate what’s being billed as a cloud-based online video service. Read Full Post…
