The latest signs of trouble in China’s overheated Internet sector are bubbling into the headlines again, with word that group discount leader LaShou has scrapped its troubled IPO while another high level executive has resigned from e-commerce giant Jingdong Mall, also known as 360Buy. Both developments have some company-specific issues behind them, but more broadly speaking they also reflect an overheated China Internet that has seen internal turbulence grow at many companies as they struggle for dominance and simply survival.
Tag Archives: Lashou
News Digest: June 20, 2012 报摘： 2012年6月20日
The following press releases and media reports about Chinese companies were carried on June 20. To view a full article or story, click on the link next to the headline.
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◙ LaShou Withdraws US IPO Application (Chinese article)
◙ 360Buy VP of Technology Resigns (English article)
◙ ZTE (HKEx: 763) to Sustain US Telecoms Investment at 10% Annual Growth Rate (Businesswire)
◙ China Eastern (HKEx: 670), Shanghai Airlines and Sabre Sign Long-term Agreement (Businesswire)
◙ China Eyes Subsidies to Develop Energy-Saving Vehicles: Paper (English article)
Tencent E-Commerce: Another Money Loser IPO 腾讯电商：将又一个失败的
I was amused to read this morning that Internet titan Tencent (HKEx: 700) may choose its money-losing e-commerce platform for its first IPO, following its recent reorganization into 6 business units to allow each of those areas to sink or swim by themselves. The reports are a bit unclear about the timing of a potential IPO, and indeed say that such an offering is just one possibility for the newly formed unit as it seeks to raise more money to eventually create a broader e-commerce platform, presumably similar to Alibaba’s highly successful TMall. (English article) If that’s the case, I hope that executives are reading the newspapers these days, as investor appetite for money-losing Chinese Internet IPOs is extremely low these days and showing no signs of improving anytime soon. The only company to make an overseas Internet IPO this year so far has been Vipshop (NYSE: VIPS), a money-losing discount retailer, and that was a complete disaster. Other potential offerings from Shanda’s online literature unit, called Cloudary, and leading group buying site LaShou have all been delayed or disappeared completely, although Shanda appears to be moving ahead with its offer after its surprise disclosure that Cloudary recently turned profitable. (previous post) In terms of Tencent’s e-commerce business, it seems to me like the unit’s biggest asset is the Tencent name itself, since Tencent is clearly China’s biggest Internet firm and its leading player in online games and instant messaging. On the other hand, Tencent has had much less success in areas like e-commerce, which rely on an older, more cash-rich demographic of users unlike games and its instant messaging that tend to draw people in the 15-25 year old age range. Tencent’s newly formed e-commerce unit contains its older Paipai online auctions business, also known as C2C, along with a more recently established B2B platform that I’ve never heard of. The unit’s new head says that one of its strengths is its strong social networking element, which presumably helps to create a community among online buyers. Social networking is certainly one of Tencent’s strengths, but I doubt whether its core base of young users, with their low consuming power, would be very attractive to most e-commerce sellers. All that said, I wouldn’t expect to see Tencent make an IPO for this new e-commerce unit anytime soon due to the current frosty market. If I were advising Tencent founder Pony Ma on how to proceed, I would tell him to make an IPO first for one of the company’s more successful units, such as its social networking or online games business, which would certainly create a bit more excitement among investors. But if e-commerce does go first in the march to market for these new little Tencents, look for weak investor interest and a stock that probably won’t go anywhere but down after its trading debut.
Bottom line: Tencent’s spin off and potential IPO for its money-losing e-commerce unit looks like a poor choice for its first IPO following its recent reorganization.
Related postings 相关文章:
◙ Tencent: Preparing for Breakup? 腾讯或为分拆铺路
◙ Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹
◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？
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
LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择
New developments are happening rapidly at group buying leader LaShou, which appears to be on the cusp of a meltdown as it runs out of money in the brutally competitive sector. As many of us prepare for the May 1 Labor Day holiday that marks the start of spring, many who follow this company may be wondering if LaShou will still be in business by summertime. In the latest development of this fast evolving story, domestic media are reporting a mass resignation of many top LaShou executives in recent days, including its top regional managers in Shanghai and Beijing, as well as a vice president. (Chinese article) That exodus would come only days after the company reportedly cut 40 percent of its technical staff in what looks like a desperate attempt to conserve cash. (previous post) These kinds of drastic cuts and resignations may indeed save cash, but if they continue there may not be any company left to operate. The rapid series of events seems to point to a company in crisis, which has been building for more than a year as a natural clean-up takes place in China’s overcrowded and unruly group buying space. LaShou made headlines a year ago when the company, then just 1 year old, raised a cool $100 million from a group of investors hoping it would become the next Groupon (Nasdaq: GRPN), the US company that pioneered the group buying concept. (previous post) Back then it was saying it wouldn’t make an IPO for at least the next 1 to 2 years. But then investor sentiment abruptly cooled toward the sector as competition heated up, leaving LaShou and many of its peers short of cash after most expanded rapidly earlier in the year. LaShou tried to raise new funds through a New York IPO last fall, but had to indefinitely postpone the plan after the US securities regulator reportedly voiced concerns about its accounting. The company was reportedly trying to relaunch its IPO in the last few weeks; but we have yet to see any public filings and if these latest reports are true I seriously doubt anyone will want to invest even if it does file for an IPO. Clearly things are happening rapidly now, which means we will probably see LaShou either close or merge with a rival in the very near future — in what would be the biggest consolidation move to date in the group buying space. A number of companies have already merged or are on the brink of closure, so LaShou certainly wouldn’t be the first in this latest trend, though it would certainly be the most dramatic. If I were betting, I would predict the chances of a merger are better than 50 percent, with a profitable rival like Dianping or even a non-group buying company like Baidu (Nasdaq: BIDU) or Tencent (HKEx: 700) stepping in to acquire the company for a very low price. Then again, there is also the very real chance that LaShou could close, though I would put that chance at 30 percent or less. Either way, I would be surprised if this company is still in business as an independent group buying site by the time summer arrives.
Bottom line: A new exodus of top executives at LaShou reflects an accelerating cash crunch, with an an acquisition of the company the most likely outcome within the next 1-2 months.
Related postings 相关文章:
◙ IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇
◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速
◙ Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100
IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇
It may be springtime, but the warmer weather can’t come soon enough for 2 of China’s leading New York IPO candidates, group buying leader LaShou and auto rental specialist China Auto, which are both still feeling the freeze from US investors towards Chinese firms. The latest media reports say that China Auto’s imminent IPO is meeting with weak demand that keeps getting worse, while LaShou is suffering an acute cash crunch due to its own ability to raise new funds from a long-delayed IPO. Let’s look first at China Auto, which looked strong early this year when it became the first Chinese company to file for a New York IPO after a half-year hiatus due to poor investor sentiment after a series of accounting scandals last year. Just a day before China Auto was set to price its delayed IPO, it was only able to find buyers for about half the 11 million American Depositary Shares it aimed to sell for $10.50 to $12.50 each, according to a foreign media report, citing unnamed banking sources. (English article) Presuming it lowers the price below the range, perhaps to around $9.50, and then manages to sell three-quarters of its planned 11 million shares, the company would end up raising around $80 million. That would represent about a quarter of the $300 million China Auto initially hoped to raise, which it cut to around $158 million earlier this month when signs of weak demand were already emerging. (previous post) I predict this IPO will go ahead, unlike several similar offerings that had to be aborted last year, since China Auto clearly needs the cash and is already so close to the final listing; but all the signs indicate investor sentiment is still extremely weak for Chinese companies, especially money-losing ones like China Auto. On a similar note, another major money loser, LaShou, is reportedly making large staff cuts and slashing its advertising spending as it seeks to conserve cash after the derailment of its own New York IPO last year. (previous post) The latest media reports are saying that LaShou has cut 40 percent of its technical staff, that the vice president of its online mall has resigned, and that it has slashed its advertising aimed at drawing visitors to its site. (Chinese article) The reports contain a response from a spokesman, who describes the moves as a “strategic adjustment”. LaShou’s original IPO plan reportedly derailed last year after several major investment banks refused to underwrite the listing due to concerns about some of the its accounting, which led US securities regulators to also request more information. One of my sources told me the company was preparing to reactivate the listing several weeks ago, though we have yet to see any new public filings. Even if it manages to file for an IPO, considering the current chilly climate, I wouldn’t expect any investors to show interest in a LaShou offering due to its money-losing status and previous questions about its accounting. If that’s the case, look for LaShou’s cash crunch to worsen in the months ahead, potentially forcing it to either close or sell itself for a bargain price to a more cash rich rival or one of China’s healthier Internet companies.
Bottom line: Weak investor sentiment will lead China Auto to raise just a quarter of the funds from its original IPO plan, and will prevent cash-starved LaShou from making its own planned listing.
Related postings 相关文章:
◙ IPOs: China Auto Slashes, People’s Daily Marches Ahead IPOs:神州组车减，人民网启动
◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速
News Digest: April 24, 2012 报摘： 2012年4月24日
The following press releases and media reports about Chinese companies were carried on April 25. To view a full article or story, click on the link next to the headline.
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◙ China Auto Rental Said to Struggle to Attract Investors (English article)
◙ Sohu, Tencent, Baidu Video Channels to Jointly Buy Copyrighted Material – Source (Chinese article)
◙ Huawei Profit Halves; Handset Competition Saps Margins (English article)
◙ Lashou Reported Cutting Staff, Halting Ads, Calls Move “Strategic Adjustment” (Chinese article)
◙ Alibaba.com (HKEx: 1688) Reports Net Profit1 of RMB339.2 million in Q1 2012 (Businesswire)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
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
China Tech Start-Ups: Coming Home? 中国科技企业扎堆国内上市？
There’s an interesting report out this morning noting that a growing number of Chinese tech start-ups that once looked like strong candidates for New York IPOs are opting for home listings instead, deterred by higher scrutiny and weak sentiment overseas and a much friendlier — if not volatile — environment on ChiNext, China’s 2-year-old Nasdaq-style enterprise board. In the latest move on that front, Chinese media are reporting a company called Baofeng, maker of a popular online and cellphone video player, has filed to make a public listing on the ChiNext, reversing its plans last year when it said it would make a 2012 listing overseas. (Chinese article) Frankly speaking, Baofeng does have the exact profile of a company that would have traditionally gone to either the Nasdaq or New York Stock Exchange to raise funds as its first choice a year ago, followed by Hong Kong as a second choice and the ChiNext as a distant third. But much has changed from a year ago, when foreign investors were still quite bullish on Chinese Internet stocks, giving them relatively rich valuations compared with peers based in more developed western markets. Such stocks have suffered a major reversal of fortune over the last year, with investors dumping their shares following a series of accounting scandals that also led to higher regulatory scrutiny and the delisting of a number of smaller players. Amid all the scandals last year, China’s securities regulator also got involved, trying to insert itself into the overseas listing process as the central government also reportedly discussed either limiting or shutting down that process completely. As far as I know, nothing specific has happened yet in terms of new Chinese government oversight, though a number of big-name western investment banks have refused to underwrite New York IPOs for some China firms over concerns about their accounting. In one of the highest profile cases, Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) both reportedly resigned from an IPO last summer for leading group buying site LaShou, which went on to hire some smaller banks but has yet to make an offering. (previous post) The lone Chinese company that did make a New York IPO this year, discount retailer Vipshop (NYSE: VIPS) was an unqualified disaster, pricing well below its indicated range and falling 30 percent since its trading debut. This new report notes that Baofeng is just the latest example of a Chinese tech start-up going to ChiNext rather than overseas, following similar moves by firms like online game developers Wushen Century Network Technology and Suzhou Snail Game. It’s probably too early to say if this move to the ChiNext will be a long-term phenomenon, and I suspect these start-ups that list there will quickly discover the market’s high volatility is far less desirable than the more stable environments in New York and Hong Kong. But if the ChiNext can implement reforms to lower volatility in the market, perhaps by opening up to more foreign investors, it could seize this opportunity to quickly position itself as a strong alternative to New York and Hong Kong for China’s vibrant field of tech start-ups.
Bottom line: A recent move by tech start-ups to China’s Nasdaq-style enterprise board could become a viable IPO alternative if the board can create a more stable listing environment.
Related postings 相关文章:
◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续
◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划
◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职
China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续
My earlier forecast that spring may soon arrive for US-listed China stocks may have been premature, as the year’s first IPO by Vipshop (NYSE: VIPS), a money-losing online discount retailer, has been a resounding flop just about any way you look at it. Some might say the fact that Vipshop completed the IPO at all is an accomplishment, and perhaps that’s true since its offering is the first major one by a Chinese company in New York for more than half a year. But the results of the offering and its share trading debut are both dismal from any perspective. The company initially hoped to raise up to $117 million when it first filed for its IPO, and later set a price range of $8.50 to $10.50 per American Depositary Share. But in a relatively rare development, it couldn’t even price the offering within that previously stated range, and ended up having to offer shares at $6.50 each — 24 percent lower than the bottom of the range. (English article; Chinese article) That meant the company only raised $71 million in the process, again nearly 40 percent less than the top end of its original target. Clearly investors weren’t very interested in this money-losing web firm, as overall sentiment towards US-listed Chinese companies remained weak due to a series of accounting scandals last year. If the early signals weren’t loud enough, investors voiced their lack of interest in Vipshop one last time on its Friday trading debut, bidding the shares down 15 percent to end the day at $5.50, giving it a market capitalization of $268 million. The offering marked a decidedly worse performance than the last major US offering by a Chinese company, video sharing site Tudou (Nasdaq: TUDO), whose miserable debut last August prompted other IPO candidates to indefinitely postpone their listings until the market improved. Tudou, which was also losing money, priced its offering in the middle of its range, and then saw its shares tumble 12 percent on their first trading day. So if Tudou was a failure, then it’s probably fair to call Vipshop a disaster. Vipshop is a relatively small player in China’s e-commerce space whereas Tudou is the second largest online video site, so it may not be completely fair to compare the 2. Still, the message from this latest offering is loud and clear: investors aren’t interested in Internet companies that are losing money, and even profitable companies would need to be leaders in their categories to attract much attention. That poses an interesting challenge for the handful of other companies that are moving ahead with listings. China Auto, the earliest company to file for an IPO this year, could still do ok as it’s not an Internet company and is a leader in the auto rental space. Shanda Cloudary and LaShou could be more problematic, as they’re leaders in the online literature and group buying spaces, respectively, but both are still losing lots of money. I expect all 3 of these companies to move forward with their offerings despite this chill from the Vipshop debut, but would look for all to see similar weak pricing and drops on their trading debuts.
Bottom line: Vipshop’s dismal IPO and trading debut indicate overseas investors still have little appetite for money-losing companies in China’s crowded Internet space.
Related postings 相关文章:
◙ Vipshop Takes Lead in IPO Race 维品会或成为今年首家赴美上市中国企业
◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划
◙ China Auto Wins 2012 Race For 1st US IPO 神州租车抢先成首个赴美IPO的中国企业
Vipshop Takes Lead in IPO Race 维品会或成为今年首家赴美上市中国企业
The race to make China’s first New York IPO of 2012 is nearing the finish line, with online discount retailer Vipshop emerging as the likely winner after getting off to a late start.The listing will mark not only the first Chinese IPO in New York this year, but also the first in months following disastrous debuts for a few companies that launched offerings last summer at the height of a confidence crisis towards US-listed Chinese stocks after series of accounting scandals. I previously said that growing signs are emerging that the worst of the crisis has passed (previous post), and at least the initial response to Vipshop’s offering appears to confirm that trend. According to a domestic media report, Vipshop has set the price range for the offering at $8.50 to $10.50 per share, meaning it would raise $95 million at the low end of the range and up to $120 million if it can get the highest price. (Chinese article) This range is quite significant, as it is unchanged from Vipshop’s announcement in its first public filing that it planned to raise up to $120 million from the IPO. (previous post) That means that investor reception to the offering was within expectation, unlike last year when many companies had to sharply scale back their capital raising plans after receiving weak or no investor demand at the height of the crisis. Online video site Tudou (Nasdaq: TUDO) became a symbol for how bad things were when it went ahead with its Nasdaq IPO despite awful sentiment last August, with its shares tumbling 12 percent on their first trading day. They continued their downward spiral after that, along with most other US-listed China firms, and now trade at just over half their IPO level. Vipshop became China’s second company to file for a New York IPO last month, following another application by car rental specialist China Auto which planned to raise up to $300 million. Online entertainment specialist Shanda has also filed for an IPO for its Cloudary online literature unit, but the Vipshop plan now looks like the furthest advanced and thus the likely winner. I would expect to see it price near the bottom end of its range as some investor skepticism remains, with its shares likely to trade flat on their debut. But even that kind of performance would be a huge improvement over last year, and would likely spark a flurry of refilings for many of the IPOs that got pulled last year as companies rush to take advantage of a new window of improved sentiment. If that happens, look for companies like online clothing retailer Vancl to file in the next 2 months, and even possibly from group buying leader LaShou, which is reportedly preparing to refile for an IPO after its previous plans also ran into trouble last year.
Bottom line: Vipshop’s New York IPO, the first for a Chinese firm this year, is likely to price near the bottom of its range, but would still mark a sign of improving investor sentiment for China stocks.
Related postings 相关文章:
◙ Vipshop Vies For First Internet Listing of 2012 唯品会欲在赴美上市电商公司中力拔头筹
◙ Debut Offshore IPO Looks Weak, But Not So Bad 阳光油砂上市首日表现差强人意
