Bottom line: Groupon’s new tie-up with Comcast shows it’s more interested in working with a well-known US-based company than the unfamiliar Alibaba, which could force Alibaba to quietly dump its Groupon stake by the end of this year.
Comcast buys into Groupon
It seems e-commerce giant Alibaba (NYSE: BABA) isn’t the only company interested in money-losing group buying site Groupon (Nasdaq: GRPN). Less than 2 months after Alibaba disclosed it had purchased 5 percent of Groupon shares, apparently in the open market, a firm backed by US cable giant Comcast (Nasdaq: CMCSA) has just announced plans for its own strategic tie-up with the faded group buying site.
This new move certainly seems to throw some doubt on my previous prediction that Alibaba’s purchase could presage a boosting of its stake in Groupon, or perhaps even an outright buyout bid. While such a move is still possible, Groupon does seem to be signaling that it intends to remain independent. It also seems to be indicating it prefers this more direct approach to forming new partnerships, rather than Alibaba’s approach that looks a bit stealthier since it appeared to buy its Groupon shares without the company’s consent. Read Full Post…
Bottom line: A high-profile China visit by Google CEO Sundar Pichai reflects warming ties between the company and Beijing, and presages a probable launch of the Google Play app store and Nexus phones in China by the end of this year.
Google’s Pichai in high-stakes game with Beijing
In a move that looks like something from a high-stakes chess game, Google’s (Nasdaq: GOOG) CEO is taking advantage of the huge publicity surrounding a recent triumph of his company’s artificial intelligence (AI) to make a high-profile visit to China. Google is hardly a welcome name in the country, following its high-profile spat in 2010 over Beijing’s strict self-censorship policies that prompted it to shutter its China-based search service.
Since that blow-up, however, Google has more recently been gingerly tip-toeing back to China. Reports through much of last year indicated the company was making necessary preparations to launch a Chinese version of its Google Play app store, possibly in hopes of selling its Nexus brand of smartphones in the world’s largest mobile market. Read Full Post…
Bottom line: Qihoo’s privatization is likely to succeed after shareholder approval of its buyout offer, though many similar pending deals could collapse and might consider strategic stake sales like the new one by LightInTheBox.
Shareholders approve Qihoo buyout
The volume of noise coming from Chinese companies privatizing from New York has dropped sharply in the last month, reflecting volatility in their home market where many hope to one day re-list. But 2 major new stories from that wave are back in the headlines, led by shareholder approval for what would be the biggest privatization so far for security software specialist Qihoo 360 (NYSE: QIHU).
At the same time, the much smaller e-commerce firm LightInTheBox (NYSE: LITB) has just closed another deal that looks less radical than an outright privatization and could provide an alternative template for companies seeking to attract more investor attention. That deal has the company selling 30 percent of itself to Hong Kong-listed Zall Development (HKEx: 2098), which paid a large premium for the stake. Read Full Post…
Bottom line: Fresh food sellers Yiguo and FruitDay could see strong growth and go public in the next 2-3 years, banking on strong partnerships with Alibaba and JD.com and growing consumer willingness to buy groceries online.
Yiguo in big new funding
Fresh fruit and other grocery items are the latest hot ticket in China e-commerce, with 2 up-and-coming players receiving big new fundings of $100 million or more. The larger of the pair has e-commerce leader Alibaba (NYSE: BABA) and global private equity giant KKR helping online fresh food seller Yiguo raise about $260 million in new money. The other has an online fruit specialist called FruitDay, whose backers include Alibaba arch-rival JD.com (Nasdaq: JD), raising its own $100 million.
This particular trend is really a sub-trend of a broader movement by China’s e-commerce giants into the grocery business over the last few years, encroaching on traditional supermarkets and also Wal-Mart’s (NYSE: WMT) Yihaodian that found early success in the space. Even Amazon (Nasdaq: AMZN) China has gotten into the business, though many of these companies specialize in more traditional packaged foods rather than fresh products. Read Full Post…
Bottom line: Microsoft’s development of a special Windows 10 China government edition reflects efforts western tech firms are making to comply with Beijing’s year-old national security law.
Microsoft makes special Windows 10 edition for Beijing
US software giant Microsoft (Nasdaq: MSFT) is sending the latest sign that foreign tech firms are bending to Beijing’s national security concerns, with word that it has created a special version of Windows 10 just for the Chinese government. This kind of a move looks relatively bold, and sharply contrasts with Apple’s (Nasdaq: AAPL) recent refusal to assist the US government in its drive to unlock a terrorist’s iPhone.
But Microsoft’s move isn’t completely unprecedented either, since the software giant also made a similar move more than a decade ago when it released the source code for Windows to Beijing. Since then, Microsoft has continued to share its Windows source code with Beijing for newer versions of the operating system, reflecting the importance the company places on the huge China market. Read Full Post…
Bottom line: Yum’s China unit is getting a relatively low value due to the country’s unique risks and slowing economy, while YTO’s backdoor listing is likely to get a cool reception due to intense competition in China’s parcel delivery sector.
Yum seeks investors for China unit
Two major IPOs are in the headlines today, one from the more mature fast-food business and the other from the fast-growing but extremely competitive package delivery sector. The first deal has Yum Brands (NYSE: YUM) in talks to sell up to 20 percent of its China division to private equity investors, as it tries to value the unit in the run-up to a highly anticipated IPO. The second has Alibaba-backed (NYSE: BABA) parcel delivery service YTO Express launching a backdoor listing in Shanghai, as it looks for cash to support its operations that are probably losing big money.
Chinese IPOs have gotten off to a slow start this year, both in China and overseas, for a number of reasons. Beijing has banned new domestic offerings for now, in a bid to stabilize markets after a massive sell-off at the beginning of the year. New US listings have also been slow, as many start-ups that previously would have chosen New York now consider listing at home instead. Hong Kong has been the only area with significant new activity, though even there the volatility in China have also depressed the market. Read Full Post…
Bottom line: WeChat’s growth will continue to fuel strong revenue gains for Tencent but could also create a drag on profits, while China Mobile’s profits are likely to be flat as savings from slower infrastructure spending are offset by big 4G promotions.
Transactions boom on WeChat
High-tech leaders Tencent (HKEx: 700) and China Mobile (HKEx: 941; NYSE: CHA) are providing a nice contrast with their latest earnings reports, pitting one of China’s most innovative private companies against one of its biggest state-run laggards. The results cast a painful spotlight on China Mobile, China’s largest mobile carrier, whose profits sagged in the fourth quarter as it lost business to more nimble companies like Tencent. Meantime, Tencent’s profits and revenue posted healthy gains, as it provided data to generate excitement about its fast-growing but money-losing WeChat social networking service.
Shares of both companies reacted much as one would expect, continuing recent trends. China Mobile shares dipped 2.1 percent after its results came out, and are down about 15 percent over the last year. Tencent’s results came out after the market closed, but I expect they will rally in the new trading day. Over the last year they are up 5 percent, which is quite impressive when one considers the main Shanghai index is down 19 percent during that time. Read Full Post…
Bottom line: Domestic buyers are likely to comprise most of the investors in Ant Financial’s latest fund raising, though the use of foreign advisers indicates some overseas participation may also be allowed.
Ant Financial raises new funds
Ant Financial, the financial services arm of e-commerce giant Alibaba (NYSE: BABA), is going back to investors for a new mega fund-raising, just a year after taking money from private investors for the first time. But any foreigners hoping to buy into Ant will probably be disappointed, since it appears this new funding round will be mostly open to Chinese institutional buyers. Likewise, Ant’s IPO that could come as soon as next year is likely to happen on one of China’s domestic stock markets, again locking out foreign investors.
Perhaps it’s only fair that foreign investors stand on the sidelines in Ant’s high-growth story, since such investors already have easy access to some of China’s top private companies that are listed overseas. By comparison, domestic Chinese investors have little or no access to shares of Alibaba, Baidu (Nasdaq: BIDU) or Tencent (HKEx: 700), even though that trio of corporate giants derive nearly all their money from China’s booming Internet market. Read Full Post…
Bottom line: LeEco’s new alliance with 6 car makers and rapid expansion of its sports programming unit look like shrewd moves to position itself as a major player in 2 big new growth areas.
LeEco in new car tie-up, fund raising
Following a relatively quiet period for one of China’s more talkative companies, online video leader LeEco (Shenzhen: 300104), formerly known as LeTV, is back in the headlines with 2 relatively large deals in the auto and sports sectors. The first has LeEco signing an alliance with some of China’s leading car makers, who have agreed to use its entertainment system in their vehicles. The second has LeEco’s sports unit raising 7 billion yuan ($1.1 billion) in its latest fund-raising round.
The pair of stories highlight 2 focus areas for LeEco, one of China’s oldest online video companies and the only one that has remained independent as others all got purchased by bigger Chinese Internet companies. LeEco is trying to move aggressively beyond its original area as an online video specialist by obtaining more exclusive content, and also by offering its products and services over the growing number of channels that consumers use to access entertainment and information. Read Full Post…
Bottom line: Ele.me is unlikely to face long-term fall-out from an attack on CCTV’s annual Consumer Rights Day show, but will still be challenged by a business model that forces it to work with thousands of small, often problematic restaurants.
Ele.me attacked on CCTV Consumer Rights Day show
Online take-out dining pioneer Ele.me is taking a double-hit this week, led by an attack on the company for working with improper licensed restaurant partners during a high-profile TV show broadcast each year on Consumer Rights Day. At the same time, the company is reportedly suffering as droves of those same restaurant partners shun its B2B service due to high fees and slow delivery times.
Both of these stories reflect just how rapidly Ele.me has risen over the last year, and also the usual cut-throat competition that has sprung up in China’s online-to-offline (O2O) take-out dining sector. Ele.me was the earliest major arrival to that space, where online companies offer take-out delivery service for diners from a wide range of local and chain restaurants. Read Full Post…
Bottom line: Alibaba will come close to meeting the top end of its target of raising $3-$4 billion with a new bank loan, and chances are as much as 50-50 that it will use the funds to make bids for Groupon or the stake of itself held by Yahoo.
Alibaba turns to banks for new mega-loan
After first splashing into the headlines with rumors 2 weeks ago, e-commerce giant Alibaba (NYSE: BABA) has finally announced its latest cash-raising exercise in the form of a syndicated loan worth at least $3 billion. Following that official confirmation, all eyes will now be looking to see if Alibaba can find more demand to boost the loan amount even higher, and for any indication of what exactly it has planned for the new funds.
Let’s begin by looking at the latest reports, which have Alibaba announcing the loan in a regulatory filing. It’s somewhat noteworthy that the high-profile Alibaba hasn’t issued a formal press release about the loan, perhaps because it’s waiting to see where the final amount will top out. But perhaps Alibaba has also finally realized it’s better not to raise expectations too high with a hype-filled announcement, which can ultimately backfire if interest from smaller banks in joining the new lending syndicate is poor. Read Full Post…
