Bottom line: Beijing and local governments should move more aggressively to regulate O2O takeout dining services, and encourage consolidation around 2-3 players with the scale and resources to ensure the sector’s healthy development.
Ele.me gets big new funding from Alibaba, Ant
New signs of overheating emerged in China’s online takeout dining realm last week, as one of the nation’s top players and a smaller rival landed major new funds to fuel their money-losing operations. The pair of deals saw China’s two leading e-commerce companies, Alibaba (NYSE: BABA) and JD.com, collectively pump nearly $1.5 billion into new investments in the space, even as other major players like Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) are also beefing up their services.
The flood of new money has produced a rapidly escalating round of price wars, offering deals for consumers but creating chaos in the market and on the streets of major cities like Beijing and Shanghai. This kind of boom is quite typical for China’s emerging high-tech sectors, but in this case also poses unique challenges due to practical dangers such as threats to food and road safety. Read Full Post…
Bottom line: Autohome and E-House are both likely to complete their privatizations from New York, continuing the migration of US-listed Chinese firms returning home to seek higher valuations on China’s stock markets.
Autohome drives away from New York
The drive back home for New York-listed Chinese companies continues as we head into the new week, with online car site Autohome (NYSE: ATHM) becoming the latest to announce a privatization plan. In a slightly unusual twist to that story, Autohome shares actually rose above the offer price before the buyout deal was announced, suggesting investors were hoping for a bigger premium than the one offered. But they quickly fell back to the offer price in after-hours trading.
At the same time, online real estate company E-House (NYSE: EJ) announced it has signed a definitive deal to privatize, nearly a year after it first announced its plan to de-list from New York. E-House’s plan has gone down a windy road since it was first announced last June at the height of a rally that saw China’s stock markets more than double in a year. Since then Chinese markets have tanked twice, and are now about 40 percent lower than where they were when E-House first announced its offer. Read Full Post…
Bottom line: Focus Media’s first major fund raising and lofty valuation following its backdoor listing in China shows such homecomings can be lucrative, but are also very time consuming, complex and not guaranteed to succeed.
Focus Media in first cash raising since backdoor listing
Focus Media has just announced its first major cash-raising exercise since its privatization from New York and return to China through a backdoor listing, and the results look quite encouraging. The company said it plans to raise 5 billion yuan, or nearly $800 million, by issuing new shares after making the homecoming through a shell company called Hedy Holdings (Shenzhen: 002027).
But what’s really impressive is the valuation that Focus, a provider of advertising services, has gotten as it leads a group of Chinese companies that are abandoning New York listings to return home to China. According to data from 2 reputable websites, Hedy Holdings now has a market value of 150 billion yuan, or about $23 billion. If that’s correct, it would be nearly 6 times what Focus was worth when it launched its plan to privatize in 2012. Read Full Post…
Bottom line: Baidu’s new reorganization is further evidence that the company plans to spin off its newer, money-losing units into separate companies, which could list on China’s OTC-style New Third Board later this year.
Baidu reorganizes
Online search leader Baidu (Nasdaq: BIDU) is in a couple of big headlines as it reportedly prepares to spin off some of its non-core businesses, led by word of a major reorganization that could help facilitate such spin-offs. A separate headline says that Baidu is also in talks for a $1 billion syndicated loan, in a move that is mostly market driven but also aims at getting fresh money to continue funding many of its loss-making newer businesses.
Baidu came under fire last year for its sluggish profit growth, as founder Robin Li insisted he would continue to invest heavily in his company’s loss-making businesses like its Nuomi group buying site and Qunar(Nasdaq: QUNR) online travel agency. Investors punished Baidu’s stock as a result, leading to reports earlier this year that Baidu was planning to spin off many of those businesses into separately listed companies. Read Full Post…
Just a day after fast-growing car services firm UCar confirmed a major new tie-up with e-commerce giant Alibaba (NYSE: BABA), we’re getting more details about the new alliance that appears to auger an end to Alibaba’s previous relationship with homegrown Uber rival Didi Kuaidi. At the same time, Alibaba has just announced its largest overseas purchase ever by paying $1 billion for a controlling stake of Southeast Asian e-commerce specialist Lazada.
These 2 news items continue a recent acceleration in M&A activity for the hyperactive Alibaba, which is quite in line with the hyperactive nature of its founder and chief pilot Jack Ma. This kind of cyclical hyperactivity has become the norm for Alibaba in recent years. It typically sees the company’s high-profile activity go into overdrive for a year or so, only to come to a sudden halt when things become overheated and problems emerge. Read Full Post…
Bottom line: Alibaba’s new tie-up with Car Inc hints at a looming divorce with Didi Kuaidi, while a major new funding for its Koubei unit foreshadows a major new push that will further heat up intense competition in take-out delivery services.
Koubei seeks big new funding
Just days after reports emerged of a massive new funding for its Ant Financial unit, e-commerce leader Alibaba (NYSE: BABA) is back in the fund-raising headlines with big plans for its Koubei take-out dining unit. At the same time, an intriguing new story about a strategic Alibaba alliance with an aggressive new player in the hired car services space hints that the company may also be contemplating a divorce with national leader Didi Kuaidi.
Both of these stories reflect the catch-up game that Alibaba is playing in two important growth areas of the Internet. Alibaba previously had a presence in both through investments in hired car service provider Kuaidi and group buying site Meituan. But both of those partners entered mega-mergers over the last 6 months with their major rivals. As a result, Alibaba has divorced itself from the current Meituan Dianping, and is looking to build up its own rival Koubei take-out dining service. (previous post) Read Full Post…
Bottom line: Massive new fund raising by Ant Financial and Didi Kuaidi show there’s still lots of money looking to invest in emerging Chinese industries, though current valuations are overblown and likely to stagnate as China’s economy slows.
Ant Financial raises $3.5 bln
Every time I write that new funding seems to be cooling for Chinese tech companies, new reports emerge of yet another mega-funding. Two such new fund-raisings are in the headlines as the new week begins, led by a massive $3.5 billion new round for Alibaba-affiliated (NYSE: BABA) Ant Financial. The other mega-deal has homegrown car services provider Didi Kuaidi poised to raise $1.5 billion or more in new funding, as it vows to outspend an equally aggressive Uber for supremacy in the China market.
These 2 fundings show there’s still plenty of money chasing hot deals in China’s emerging industries, many in the tech and financial sectors. Two of my younger friends here have left more traditional media jobs over the last year to join the crowded field of private equity firms that are funding many of these deals, allowing hot companies like Didi Kuaidi and Ant to easily meet their targets and achieve very high valuations in the process. Read Full Post…
Bottom line: Alibaba’s removal of the paywall from the SCMP’s website shows it may want to use the newly acquired newspaper in its bigger strategy to get more news from big data, as it seeks to boost its global influence.
Alibaba removes paywall at SCMP.com
E-commerce giant Alibaba (NYSE: BABA) is in the headlines as it wraps up its landmark purchase of Hong Kong’s leading English language newspaper, announcing it will formally remove the paywall on the South China Morning Post’s (SCMP) website as its first major strategic move. In a completely separate headline, Alibaba has also named a new head for its international public relations team, replacing a heavy-hitter it hired less than 2 years ago in the run-up to its record-breaking New York IPO.
Both of these moves reflect the rapid changes taking place not only at Alibaba, but also in the traditional media realm where the SCMP operates. Traditional newspapers like the SCMP are looking desperately for new revenue sources as they get abandoned by their traditional advertisers and subscribers who are flocking to the Internet. Read Full Post…
Bottom line: Homelink’s new mega funding reflects a recent renewed boom for Chinese real estate in major cities, while Alibaba’s backing of Momo’s buyout could presage a tie-up between Momo and Weibo.
Alibaba joins Momo buyout group
A couple of big fund-raising stories are in the headlines, led by the latest mega-funding for the fast-expanding real estate agent Homelink. Meantime, separate reports are saying that e-commerce giant Alibaba (NYSE: BABA) has joined a group aiming to privatize social networking app Momo (Nasdaq: MOMO), helping to squash skepticism that the buyout offer announced last year might collapse due to insufficient funding.
The only common thread to these 2 stories is that they show big funding remains available for high-growth companies in China, fueled in part by profits being generated by China’s booming real estate market. That boom has been directly responsible for Homelink’s meteoric rise, and seems like a good place to start this discussion of these 2 new mega fundings. Read Full Post…
Bottom line: Ctrip’s stock could be set for strong gains over the next 12 months, thanks to strong profit growth following its recent string of equity tie-ups that have neutralized most of its major competitors.
Ctrip neutralizes rivals with string of tie-ups
In this series on my favorite China-concept stocks, leading online travel agent Ctrip (Nasdaq: CTRP) is the only one that I don’t really like in terms of corporate personality. But that fact aside, there’s still plenty for investors to like about this company that has slowly built up an enviable empire in China’s fast-growing market for travel services.
Ctrip was ahead of the curve with its establishment back in 1999 when China’s Internet and travel industry were both in their infancy. It was also one of China’s earliest Internet companies to list in the US, making a New York IPO back in 2003. Since then its prospects have soared with China’s booming travel industry, as the company faced relatively little competition for most of its first decade in business. Read Full Post…
Bottom line: A flurry of new de-listing activity shows that well-funded privatizations will continue despite market volatility in China, and could also spread to undervalued private companies listed in Hong Kong.
Wanda Commercial Properties eyes buyout
The headlines are brimming with new moves in the buyout wave that has swept over off-shore listed Chinese stocks, which are privatizing in droves due to disappointing valuations. Leading the news are 2 former high-flyers, online video site Youku Tudou (NYSE: YOKU), which has formally completed its buyout by e-commerce giant Alibaba (NYSE: BABA); and property giant Wanda Commercial Properties (HKEx: 3699), which has announced it is exploring a potential buyout less than 2 years after its Hong Kong IPO.
That pair are joined by 2 smaller stories involving ongoing privatizations by budget hotel operator Homeinns (Nasdaq: HMIN) and the shriveling Ku6 Media (Nasdaq: KUTV). Media are saying that Homeinns has already lined up a Chinese listing vehicle to resume its life as a publicly traded company after it de-lists from New York. And Ku6 has announced it has formally signed a buyout agreement that will result in its own de-listing. Read Full Post…
