Bottom line: The CSRC needs to implement IPO reform, even though it may cause short-term stock market volatility, or risk more market distortions like the recent surge in New Third Board and backdoor listings.
Ucar lists on New Third Board
China’s over-the-counter (OTC) stock exchange notched a notable milestone last week, when a private car services provider with just a year of history made its trading debut with a hefty valuation of more than 40 billion yuan ($6 billion). The impressive valuation for Ucar extended a trend that has seen new listings and valuations explode this year on the Beijing-based National Equities Exchange Quotation (NEEQ) system, often called the New Third Board.
The explosion owes to a number of factors, most a by-product of a sharp slowdown for traditional IPOs on China’s more mature stock markets in Shanghai and Shenzhen due to the regulator’s concerns about market volatility. That same conservatism has prompted a growing number of companies to seek public listings by injecting their assets into existing traded shell companies, again creating distortions and chaos in the market through a process known as backdoor listings. Read Full Post…
Bottom line: Baidu’s rapid expansion of its global mapping services is mostly targeted at Chinese traveling abroad, and is unlikely to attract many local users because better services are already available in most markets.
Baidu maps South America
Still suffering from a spate of negative news at home, leading search engine Baidu (Nasdaq: BIDU) is trying to draw attention to the more upbeat subject of its global expansion that is slowly inching forward. The company has squarely focused its global drive on emerging markets, and is continuing that trend with word that it’s launching new editions of its mapping services for most of South America. Baidu has already launched a version of its core search business in Brazil, and many will probably view this move to launch mapping services in 13 countries as a prelude to future launches for search service in those markets. Read Full Post…
Bottom line: Didi and Uber may reach a truce in their China price wars under pressure from their investors, and could ultimately merge their China operations in discussions that could begin later this year.
Didi, Uber under pressure to end price wars
The past year has seen some mergers of former bitter rivals due to financial pressures, and the latest reports indicate yet another such marriage could be coming between hired car services giants Didi Chuxing and Uber. The reports are grounded in word from insiders that the pair have begun talks about ending their bitter price wars, which have helped them to gain big market share but are also costing them millions or even billions of dollars in losses. Those talks have naturally led some to speculate that the pair might even merge, though in my view that possibility seems rather low, at least right now. Read Full Post…
Bottom line: Facebook’s new hire of a top WeChat executive could be the latest signal that it expects to get permission to launch a China-based service soon, possibly by the end of this year.
WeChat exec defects to Facebook
Following several months of relative silence, social networking (SNS) giant Facebook (Nasdaq: FB) is back in the China headlines, with word of a major executive poach from China’s leading SNS company. This particular headline is filled with mixed signals. On the one hand, the hire of a former top executive from WeChat looks like a significant move closer to China, since the hugely popular Chinese SNS operator would be Facebook’s main rival if it’s ever allowed into China. But on the other hand, the executive is a foreigner from WeChat’s international division, which has been a poor performer in the service’s weak attempts to go global. Read Full Post…
Bottom line: IPOs by China Lending, China Film and Babytree should all do relatively well, and their diverse listing destinations reflect the growing choices available to Chinese companies for public offerings.
Babytree raises 3 bln yuan
A trio of mid-sized entrepreneurial companies are in the IPO headlines, including one headed for New York, another opting for Shanghai and a third eyeing a possible listing on Hong Kong’s underutilized board for high-growth companies. The first of the trio, which will make its trading debut this week in New York, comes from micro lender China Lending Corp (Nasdaq: CLDC). The second comes from China Film Co, the nation’s largest movie distributor; and the third comes from baby products seller and online community operator Babytree, which has just raised a nifty 3 billion yuan in pre-IPO funding. Read Full Post…
Bottom line: Baidu will raise the valuation of iQiyi as it sells the unit to outside investors, in a bid to avoid insider dealing accusations, while it will also suffer a revenue hit as it evicts advertisers who operate illegal gambling sites.
Baidu under fire for low iQiyi valuation
Internet search giant Baidu (Nasdaq: BIDU) can’t seem to catch a break over the past week. First the company was hit by reports of a major rejection in Hollywood, and then an investigative report revealed it was hosting links to illegal gambling sites. Now the company is being rejected again by US investors, who are complaining that Baidu is grossly undervaluing its iQiyi online video service as it prepares to sell the unit to a group led by company chief Robin Li. At the same time, the earlier gambling site scandal is taking a new twist, with the Internet regulator reportedly opening an investigation into the matter. Read Full Post…
Bottom line: Zhou Hongyi should be commended for completing his privatization of Qihoo in the face of numerous obstacles, though his plans to re-list his company in China might take at least 1-2 years.
Qihoo completes de-listing
I haven’t always been a fan of security software specialist Qihoo 360 (NYSE: QIHU) over the years due to some of the overly aggressive and often ethically questionable business practices of chief Zhou Hongyi. But I have to admire the outspoken Zhou today, following word that he has reportedly just completed the biggest buyout of a US-listed Chinese company in history despite facing numerous obstacles that seems unsurmountable at times.
Far smaller US-listed Chinese companies have abandoned their plans to privatize due to choppy markets and the difficulty of completing such deals. But Zhou remained steadfast throughout in his desire to privatize his company, with the result that Qihoo’s shares will officially de-list with the start of trade on Monday, July 18, according to new Chinese media reports. (Chinese article) Read Full Post…
Bottom line: Baidu could suffer more lost business after purging stealth advertisers engaged in gambling and sex services, while its new credit-scoring tie-up looks like a smart way to take advantage of its huge volumes of user data.
Baidu purges search results of online gambling sites
A day after appearing in 2 major global entertainment stories, online search leader Baidu (Nasdaq: BIDU) is back in the headlines at home in a new scandal involving online gambling sites that used stealth methods to promote themselves on Baidu’s search service. Normally I would say this particular scandal looks relatively minor and wouldn’t have a major impact on Baidu. But such scandals have suddenly become much bigger news following one back in May, which was centered on Baidu’s longtime practice of combining paid search results with organic ones without disclosing that mixture. Read Full Post…
Bottom line: A Chinese group’s decision to downsize an earlier deal to buy Norway’s Opera was likely due to insufficient funds to complete the deal, but will still give Qihoo an important new browser asset in its drive to go global.
China group downsizes deal for Norway’s Opera
Just a day after trumpeting its successful privatization from New York, software security specialist Qihoo 360 (NYSE: QIHU) is being more low-key in announcing the new failure of its bid for Norwegian browser maker Opera (Oslo: OPERA). In fact, Qihoo was really just one member of a group that bid $1.2 billion earlier this year to buy Opera, owner of the world’s fourth most popular web browser. (previous post) Following the decision to scrap the sale, the 2 sides have simultaneously announced a smaller deal that would see the Chinese group buy about half of Opera’s assets for about $600 million. Read Full Post…
Bottom line: Baidu’s Robin Li could announce a deal later this week to buy 40 percent of soccer club AC Milan, while his company’s pursuit of Paramount was likely killed by internal fighting at the Hollywood studio.
Paramount spurns Baidu, Wanda
Internet search leader Baidu (Nasdaq: BIDU) is in a couple of major entertainment headlines as the new week begins, led by word that it could finally announce a highly anticipated deal that would see it buy a major stake of European football club AC Milan. At the same time, separate new reports are saying that the company was rejected in a recent bid for a strategic stake in Hollywood giant Paramount, the studio arm of Viacom (NYSE: VIAb). Those same reports are saying Wanda Group, another Chinese entertainment aspirant, was also rejected in pursuit of a similar deal. Read Full Post…
Bottom line: Car Inc’s hired car services unit’s $5.5 billion valuation on China’s New Third Board is hugely overinflated, while Yidao’s new clash with Tencent shows the regulator needs to become more active in oversight of WeChat.
Two of China’s second-tier hired car services providers are in the headlines heading into the weekend, as these smaller companies fight an uphill drive to attract attention away from industry giants Didi Chuxing and Uber. The larger of the 2 stories has the hired car services unit of car rental leader Car Inc (HKEx: 699) receiving approval for a listing on China’s over-the-counter (OTC) New Third Board, valuing the company at a hefty 37 billion yuan ($5.5 billion). The second story has Yidao getting in a tussle that has seen promotion of its services blocked on Tencent’s (HKEx: 700) wildly popular WeChat platform . Read Full Post…
