Bottom line: Alibaba’s interest in Metro’s China operations is part of its new retail strategy, while the purchase of a British payments company by its Ant Financial unit could give it a strong toehold in the European payments market.
Alibaba in new shopping spree
After a period of relative quiet, e-commerce giant Alibaba (NYSE: BABA) is suddenly springing into three relatively major headlines simultaneously on the investment front. Two have a European angle, one involving a major potential investment in German retailer Metro and the other in a British financial services provider by its Ant Financial affiliate. The other is a trans-Pacific deal of sorts, and has the company investing in Bilibili (Nasdaq: BILI), a leading U.S.-listed Chinese video streamer.
In all honesty, this particular flurry of deals seems a bit random and it’s almost certainly coincidence that all are in the headlines at the same time. But that said, each does reflect one or more tendencies by this hyperactive company, which I’ve previously said has far more cash than it knows what to do with. Read Full Post…
Bottom line: A slowdown in New York IPOs by Chinese firms at the start of the year was largely caused by the government shutdown, and activity could soon pick up starting with a listing by leading live broadcaster Douyu.
Government shutdown hits IPOs
We’ll kick off my first post of the Lunar New Year with a look at New York IPO activity in the first part of 2019, or more precisely the lack of activity for Chinese companies. If this were any other year, I would say such a silence is probably normal, since in the past the first quarter has been a difficult period due to the western New Year holiday on Jan. 1 followed rapidly by the Chinese New Year, which this year fell on Feb. 5.
But this is no ordinary year, coming off a 2018 that was one of the busiest years for Chinese IPOs in New York and Hong Kong in quite some time. This year got off to a relatively quick start with a New York IPO filing to raise up to $300 million by financial technology (fintech) company Futu, which actually came at the very end of last year. (English article) Now the latest reports are saying video streaming site Douyu has just made its own confidential filings for an even bigger offering that could raise up to $500 million. (English article) Read Full Post…
Bottom line: Two new vetoes for Chinese purchases of US microchip and financial companies are the latest signals the Donald Trump administration intends to use such vetoes to fight for a more balanced trade relationship.
Washington vetoes 2 more Chinese U.S. purchases
What started as a trickle of dying cross-border deals involving Chinese buyers of US assets is showing signs of becoming a flood, with two new vetoes hitting the headlines. The latest of those is from the all-too-familiar high-tech chip sector, and has US chip maker Xcerra (Nasdaq: XCRA) saying it is scrapping its plan to be purchased by a Chinese buyer after failing to win clearance from the US national security reviewer. In a related vein, the Chicago Stock Exchange earlier this week scrapped a similar deal due to objections from the US stock regulator.
This pair of collapses extends a recent string of similar developments that actually dates back to the Obama administration. But the pace is clearly picking up under current President Donald Trump, who has made no secret of the fact that he wants to see a more level playing field in US-China trade relations. Whether or not these deals represent a real security risk is open to interpretation. But regardless, Trump is making it clear he will use this pretext to block deals in the sensitive financial and high-tech sectors. Read Full Post…
Bottom line: Alibaba’s purchase of 33 percent of Ant Financial looks like a shrewd move for both firms, making Ant more attractive in the run-up to an IPO likely to be one of the world’s biggest this year.
Alibaba and Ant back together
In what looks like a homecoming of sorts, e-commerce giant Alibaba(NYSE: BABA) has just announced it is taking back a major stake in its Ant Financial affiliate. Followers of this pair will know they have quite a long and complex relationship, and were actually once part of the same company. But they were split apart around a decade ago for political reasons, which apparently aren’t an issue anymore.
The other major plank to this story is Ant’s own story, including the unusual way in which this deal was structured. The company, whose core asset is the popular Alipay electronic payments service, is gearing up for what could be one of the biggest fintech IPOs of this year, likely to raise several billion dollars in Hong Kong. Thus this particular move could be designed to draw more attention to this lesser-known Alibaba offspring, and also to relieve it of some of its financial burden in the run-up to that offering. Read Full Post…
Bottom line: Ant Financial’s purchase of 20 percent of Hong Kong restaurant ratings site OpenRice looks like a smart, incremental move to boost its presence in its first major foray to build a local customer base outside China.
Ant Financial buys into HK’s OpenRice
We’ll close out the week with a lighter story, with word that Alibaba’s(NYSE: BABA) Ant Financial affiliate has taken a nibble at Hong Kong with an investment in the territory’s most popular restaurant ratings site. On a more serious note, we should point out that this particular acquisition comes after the much higher-profile failure of Ant’s bid to buy US money-transfer giant MoneyGram (NYSE: MGI), which was vetoed by Washington on national security ground.
This latest particular purchase is somewhat interesting, as Hong Kong is quickly evolving into an important test case for whether Ant can successfully export its popular Alipay electronic payments service to other markets. Alipay is already widely available throughout the world, but only as a vehicle for Chinese to make payments when traveling overseas. Thus Ant really hasn’t tried to target local consumers in any market in meaningful ways outside China. Read Full Post…
Bottom line: The collapse of Ant Financial’s purchase of MoneyGram reflects growing resistance from a Trump administration willing to mix business and politics in its relationship with China.
Ant’s purchase of MoneyGram sinks
In yet the latest sign that the Donald Trump administration intends to take a hard line towards Chinese M&A, Washington has killed a $1.2 billion deal that would have seen Alibaba-affiliated (NYSE: BABA) Ant Financial purchase US money-transfer specialist MoneyGram (Nasdaq: MGI). This particular development isn’t a huge surprise, since the deal was first announced about a year ago and its closure deadline was extended several times while the US hemmed and hawed on its national security review.
The de facto veto is also just the latest move by a Trump administration that has shown it won’t let US companies in the strategic tech and financial industries be acquired by Chinese counterparts. But this particular veto is also noteworthy because it’s one of the largest so far involving a purely private sector Chinese buyer. Up to now, nearly all the deals to be vetoed have come from buyers with strong links to Beijing, either directly or through government-supplied financing. Read Full Post…
Bottom line: A new crackdown on microlenders could put a slight damper on their growth, but is unlikely to affect them significantly next year unless China experiences a bad debt crisis.
Beijing clamps down on microlenders
Word that China will clamp down on the nation’s thriving field of online microlenders is sending a chill through the sector, as many predict new moves could severely slow down their breakneck growth. The newly-announced crackdown is only aimed at new microlenders, at least for now, with word that the central government has ordered all provinces to immediately stop issuing new licenses for such companies. (English article)
But like everything else in China, where there’s smoke there’s often fire not far behind. In this case, market watchers and participants are expecting this sudden freeze in new licenses is a prelude to a bigger clampdown, which is probably sorely needed. The explosion in microlenders over the last two or three years really does seem a bit out of control, and Beijing is clearly worried about the possibility of mass defaults due to poor risk management in this fledgling industry. Read Full Post…
Bottom line: The wave of strong sentiment for new offshore IPOs by Chinese companies is running out of steam, but listings before year-end could still get a slight left, especially fintechs.
Hexindai jumps on trading debut
Fintech is hot, and just about everything else is not. That appears to be the message with the latest offshore IPO by a Chinese firm, this time from Hexindai (Nasdaq: HX), a peer-to-peer (P2P) lender that takes in money from small investors and then lends it out to borrowers. Hexindai’s shares initially soared as much as 70 percent in their trading debut before finishing a much more modest but still comfortable 20 percent higher.
We’ll review the latest offshore IPO by a Chinese company in more detail briefly, but I thought this would also be a good opportunity to do a scorecard for a broader flurry of deals that has hit the market in the last month or two to see how they’re doing. The bottom line seems to be quite clear: IPOs from this new generation of financial technology companies, or fintech, are generally doing ok, while just about everyone else is now below their IPO prices. Read Full Post…
Bottom line: The strong debut for Rise Education reflects good investor appetite for new China concept stocks in New York, which should bode well for a new listing by Jianpu and could also buoy iClick.
Jianpu, iClick file for NY listings
The IPO floodgates are opening wider following the hugely successful listings of microlender Qudian (NYSE: QD) in New York last week and the Hong Kong listing of online insurance provider ZhongAn (HKEx: 6060) shortly before that. Those two nice debuts may be partly behind an equally impressive launch for Rise (Nasdaq: REDU), an education services firm that looks far less high-tech than that other pair.
At the same time, two other higher-tech names have just made their first public filings, with iClick and JianpuTechnology aiming to raise $100 million and $200 million in New York, respectively. Read Full Post…
Bottom line: A periodic window of IPOs that opens every 2-3 years is taking shape, with fintechs and other new categories like online literature likely to do well, while older concepts like e-commerce could struggle for attention.
My long-predicted IPO floodgate has finally burst, with no less than four major offerings in the headlines as we go into the new week. The new offerings I’m referring to involve two in the US, one for fintech startup Ppdai and another that has been talked about forever for Sogou, the search engine backed by Internet superstar Tencent(HKEx: 700) and the less steller Sohu(Nasdaq: SOHU).
Meantime, one of the other IPOs also involves Tencent, with its China Reading online literature unit getting cleared by the Hong Kong stock exchange and set to file its prospectus. Last but not least is Bona Film, the formerly New York-listed company that has been cleared for a re-listing in China. Read Full Post…
Bottom line: ZhongAn should perform reasonably well over the short- to medium-term by drawing on its big-name investors for business, but faces uncertainty due to an untested business model.
ZhongAn banks on online insurance
There’s not a ton to say about the year’s first blockbuster IPO from the fintech realm, since it really went pretty much according to plan. I’m talking about the just-concluded listing for online-only insurance startup ZhongAn Online Property & Casualty Insurance, which was almost guaranteed a strong debut when its shares began trading yesterday in Hong Kong.
The bigger question for ZhongAn and its other fintech peers will be whether they can continue to thrive once the spotlights are gone and they have to do business over the longer term. Anyone can pretty up their books in the run-up to an IPO, but keeping the business flowing afterwards is often a bit more problematic. ZhongAn could be a good case in point, as its product lineup seems to be constantly evolving, as does the lineup for many of these fintech firms, due to individual and broader industry factors. Read Full Post…
