Bottom line: Alibaba is likely to enter talks to buy a strategic stake in Groupon or even make a bid for the entire company, following its disclosure that it has purchased 5.6 percent of the US company in the open market.
Alibaba buys Groupon stake
What exactly was leading Chinese e-commerce company Alibaba (NYSE: BABA) thinking when it quietly purchased 5.6 percent of Groupon (Nasdaq: GRPN) shares on the open market without informing the faded US group buying pioneer? That’s the question that will be making the rounds this week, following the surprise disclosure of Alibaba’s purchase that Groupon only learned about through a regulatory filing.
Of course the most intriguing possibility is that Alibaba could be weighing a bid to acquire Groupon completely, which wouldn’t be that preposterous for reasons I’ll explain shortly. Other media are putting a less aggressive spin on the move, saying that Alibaba simply hopes to learn from Groupon’s group buying skills that first propelled it to fame about 6 years ago. Read Full Post…
Bottom line: Baidu’s reported plan to spin off many of its non-core units for separate listings in China looks like a smart move to attract Chinese buyers for its newer businesses while retaining US investors for its lucrative core search business.
Baidu eyes domestic IPOs for non-core units
Leading search engine Baidu(Nasdaq: BIDU) is reportedly eyeing plans to spin off many of its smaller units for IPOs in China, marking a novel alternative for the growing number of Chinese tech firms torn between listing at home and in the US. The US was the traditional choice for listings by Chinese venture-backed tech firms for most of the last 2 decades, since domestic listings were difficult or impossible during that time due to a heavy bias towards big state-owned companies.
But more recently China has rolled out a new group of boards aimed at attracting high-growth venture-backed companies. The earliest of those, the ChiNext board launched in 2009, has proven quite successful, nurturing such high-flyers as online video site LeTV (Shenzhen: 300104) and film production company Huayi Bros (Shenzhen: 300027). A more recently launched over-the-counter (OTC) board has also proven quite popular, and Shanghai plans to launch its own emerging industries board later this year. Read Full Post…
Bottom line: Shanda Group is likely to emerge this year as China’s next major global investor with 2-3 major deals, while Renren’s plans to transform into a high-tech investment company stand a 50-50 chance of success.
Shanda, Renren see future in investment
Two former Internet high-flyers that later flamed out are looking for new beginnings in finance, with Shanda Group and Renren (NYSE: RENN) both discussing their transformation plans in separate reports this week. Shanda was once China’s leading online game operator, and its chief Chen Tianqiao dreamed of creating an online entertainment empire. Similarly, Renren was once China’s leading social networking service (SNS) opeartor, at one time often called the Facebook (Nasdaq: FB) of China.
But both companies got overtaken in recent years, and were largely marginalized by better-run rivals like Tencent (HKEx: 700), NetEase (Nasdaq: NTES) and Weibo (Nasdaq: WB). As a result, Shanda founder Chen Tianqiao has recently sold off the various pieces of his former empire, most recently closing the sale of his original Shanda Games operation. Renren is also in the process of privatizing, as its core SNS business rapidly shrivels. Read Full Post…
Bottom line: A new landscape in China’s O2O restaurant services market is taking shape around the “big 3” firms of Alibaba, Baidu and Tencent, with a Tencent-backed Meituan-Dianping the most likely to succeed.
Alibaba eyes Ele.me stake
We’re seeing more signs of a major shuffle in the China market for online-to-offline (O2O) dining services, with e-commerce leader Alibaba(NYSE: BABA) at the center of 2 major new developments in the space. One would see Alibaba invest $1.5 billion for about a third of Ele.me, the leader in O2O takeout dining services. The other has media reporting that Alibaba is looking to sell its 7 percent stake in Meituan-Dianping, China’s recently formed leading group buying site that operates a rival takeout dining service.
The big driver behind both of these stories is a major consolidation taking place in the O2O marketplace, where money-losing companies are suddenly scrambling to find wealthy backers after being cut off by their more traditional funding sources. Many of those companies have found a receptive audience from China’s cash-rich “big 3” Internet titans of Alibaba, Tencent(HKEx: 700) and Baidu (Nasdaq: BIDU). Read Full Post…
Bottom line: An aggressive new share buy-back and tie-up between its Qunar unit and former rival Ctrip could indicate a new pragmatism from Baidu chief Robin Li, signaling a potential new era of more realistic spending on its emerging businesses.
Baidu jumps on mixed report
Investors hoping for new signs of restrained spending in the latest results from Baidu (Nasdaq: BIDU) were disappointed, as China’s leading search engine continued a recent spending frenzy that has sharply eroded profits. But that didn’t stop those same investors from bidding up Baidu’s shares after release of its third-quarter results, leading me to believe they’re hoping the spending frenzy may soon start to subside. We saw some signs that may be happening earlier this week, following a landmark tie-up between Baidu’s Qunar (Nasdaq: QUNR) online travel site and former archrival Ctrip (Nasdaq: CTRP).
Despite its frenetic expansion outside its core search business over the last year, Baidu remains largely a one-trick pony, deriving most of its revenue from its core online search business. It has found some success in some newer areas, such as online video, travel services and group buying. But the reality is that those businesses are still quite small in terms of revenue contribution, and all are losing big money as Baidu allows them to spend heavily in pursuit of market share. Read Full Post…
Bottom line: The equity tie-up between Ctrip and Qunar is likely to be an uneasy one driven by necessity rather than desire to work together, and stands a 50-50 chance of ending in divorce.
Ctrip, Qunar get hitched … sort of
The year 2015 will go down in Chinese Internet history as the year of the uneasy partnership, as several pairs of former foes suddenly merged even as their outspoken heads refused to work together. The latest of those unions is seeing former bitter rivals Ctrip (Nasdaq: CTRP) and Qunar(Nasdaq: CTRP) get together in a quasi marriage that qualifies as the largest and also strangest union to date.
This particular union isn’t even really a true marriage, and instead is a very big equity swap that will see Qunar’s controlling stakeholder Baidu(Nasdaq: BIDU) get 25 percent of Ctrip. Ctrip will get a larger chunk of Qunar on a percentage basis, ending up with 45 percent voting interest in its former rival. (Baidu announcement; English article; Chinese article) Like the other odd marriages this year, this latest one looks set for troubles, and could stand a very real chance of divorce. Read Full Post…
Update: An official at an investment firm involved in the deal confirmed to YCBB that the merger talks are happening.
Bottom line: The merger of Dinaping an Meituan will make uneasy in-laws of Tencent and Alibaba, and will likely be followed within a year by a buyout by one of the partners or IPO for the new company.
Meituan, Dianping in uneasy union
The headlines are buzzing today with word of an imminent merger between leading group buying sites Dianping and Meituan on this first day back to work after the week-long National Day holiday. The deal is certainly a landmark one, as it will create a clear leader in the emerging category of online-to-offline (O2O) companies that bring together the convenience of Internet buying with offline products and services like restaurant dining, going to the movies and hailing a taxi.
Some media are pointing out the merger will pose a major new challenge to the aggressive O2O aspirations of Baidu (Nasdaq: BIDU), which is pouring hundreds of millions of dollars into building out its own rival services. But for me, this particular marriage represents the latest chapter of an increasingly close but also uncomfortable alliance between the country’s other 2 Internet giants, Tencent (HKEx: 700) and Alibaba (NYSE: BABA), which are major stakeholders in Dianping and Meituan, respectively. Read Full Post…
Bottom line: Baidu’s reported plan to sell its online music unit looks like a smart way to rid itself of a controversial piracy-plagued business that holds little value for its main strategic focuses going forward.
Baidu set to dump music unit?
In what could be a move that’s long overdue, leading search engine Baidu (Nasdaq: BIDU) is reportedly eyeing a sale of a music division that was once one of its major attractions but in recent years has become more a liability due to frequent accusations of copyright violations. Baidu wasn’t commenting on the reports, but such a move would be consistent with its recent diversification into a range of new areas, none of which include music as part of their core business.
Such a deal, if it’s really in the works, probably wouldn’t be worth too much, perhaps in the $100-$500 million range at the very most. More significantly would be the disposal of a unit that in the past has come under fire for allowing rampant piracy through illegal peer-to-peer (P2P) trading of copyrighted music. Read Full Post…
Bottom line: A threat to privatize Baidu by chairman Robin Li is probably the result of frustration at recent declines in the company’s stock and is unlikely to result in a serious buy-out bid.
Frustrated Robin Li threatens Baidu privatization
The biggest privatization threat to date by a US-listed Chinese company has just come from online search leader Baidu (Nasdaq: BIDU), whose chairman Robin Li is joining a growing chorus of executives who say their shares are underappreciated by Wall Street investors. In this case it’s easy to see why Li is unhappy, since Baidu’s stock has lost a quarter of its value since July, when the company reported a spending binge on new businesses had sapped its profits.
Baidu’s shares were actually down by an even greater 30 percent at the start of this week, but surged 6 percent in the latest session amid a broader rally for Chinese Internet stocks. It should come as no surprise that the US surge was sparked by a rally earlier in the day on China’s domestic stock markets, which is where Baidu and many of its other US-listed Internet peers say they would like to re-list. Read Full Post…
Bottom line: Contention around Meituan’s new mega-funding and Ele.me’s urgent desire to sell itself reflect overheated competition in the O2O restaurant services market, which could result in a major shake-up over the next 12 months.
Meituan denies rumors of funding collapse
Just a couple of days after reports emerged about the latest fund-raising by leading group buying site Meituan, the newest reports are painting a more chaotic scene in the sector for online-to-offline (O2O) services involving collaboration between web sites and restaurants. Meituan is once again in the news, though this time it’s denying rumors that its latest fund-raising has collapsed. Meantime, take-out dining delivery specialist Ele.me is also reportedly in frantic need of cash due to stiff competition gobbling up the industry.
This pair of stories reflects a cycle that’s all too common for emerging industries in China. That cycle typically sees one or two companies find success in a new business area, sparking a gold-rush that sees many others rush into the space. The result is always a surge in overcapacity, which is almost always followed by a shake-out that sees most companies close or withdraw from the business. Read Full Post…
Bottom line: Intensifying competition in dining-related O2O services is pressuring Meituan to raise more funds, and the company should seriously consider a strategic alliance with Alibaba.
O2O dining wars dog Meituan
Online-to-offline (O2O) services have become the flavor of the day on China’s Internet, and take-out dining has emerged at the epicenter of a stampede by all 3 of China’s leading Internet companies to develop the market. Over the last 2 years, leading search company Baidu (Nasdaq: BIDU), e-commerce leader Alibaba (NYSE: BABA) and social networking giant Tencent (HKEx: 700) have all launched major initiatives in the space, collectively pouring hundreds of millions of dollars into the area.
Against that backdrop, the independent Meituan is emerging as an orphan in the space, since it’s the only player without a major backer despite its status as China’s top group buying site. That could explain the latest reports that say Meituan has returned to financial markets and is in the process of raising up to $2 billion in new funds, less than a year after it raised $700 million in another massive cash-raising exercise. Read Full Post…
