Bottom line: Yahoo’s reversal of its earlier decision to spin off its 15 percent of Alibaba into a separate company will have no impact on Alibaba, which is indicating separately that it will hold onto its own big stake in Uber China rival Didi Kuaidi.
Yahoo reverses course on Alibaba stake spin-off
A couple of news items are showing that the long and complex relationship between Internet search pioneer Yahoo (Nasdaq: YHOO) and Chinese e-commerce juggernaut Alibaba(NYSE: BABA) is far from over, and how the companies may remain hopelessly entangled for a while to come. The first item made global headlines, and has Yahoo reversing its earlier decision to spin off its 15 percent of Alibaba into a separate company. The second item has Yahoo founder Jerry Yang getting named as a top adviser to Didi Kuaidi, China’s main rival to US private car services giant Uber, which counts Alibaba as one of its major stakeholders.
At the heart of this complex dance is a personal relationship between Alibaba founder Jack Ma and Yahoo’s Yang. The pair struck up a friendship more than a decade ago, and ultimately formed a major alliance that saw Yahoo purchase 40 percent of Alibaba for about $1 billion. Yahoo later sold down that stake, netting billions of dollars in profits. But it still holds 15 percent of Alibaba, which is currently worth about $30 billion. Read Full Post…
Bottom line: Google’s registration of a company in Shanghai’s Free Trade Zone is the latest incremental move in its crawl back to China, but the company will focus on apps and is unlikely to re-enter the sensitive Chinese search market.
Google searches for China opening in Shanghai
What’s becoming one of the slowest homecomings of all time has just taken another small but significant step forward, with reports that US Internet titan Google (Nasdaq: GOOG) has formally registered a new company in a 2-year-old Free Trade Zone (FTZ) in Shanghai. The move had Chinese media buzzing about an imminent return to China by Google, nearly 6 years after the company shuttered its local search service after a high-profile dispute with Beijing over censorship.
Like many of the earlier reports, this latest report looks mostly incremental and doesn’t seem to portend any imminent announcements by Google. But the reports do contain a couple of interesting developments that could hint at how the company plans to do business in the world’s largest Internet market if and when it does return. The 2 key new elements are Google’s potential choice of Shanghai for its new China base, and its registration of a new search and email services company to be run under the separate name Pengji. Read Full Post…
Bottom line: Domestic private equity is fueling a sudden resurgence in privatizations of US-listed Chinese firms, with a flurry of new deals likely to come after the signings of new buyout offers for Homeinns and Jiayuan.
Homeinns, Jiayuan move closer to US de-listings
Two companies looking to de-list their shares from New York and re-list back in China have taken major steps forward, with hotel operator Homeinns (Nasdaq: HMIN) and online dating site Jiayuan (Nasdaq: DATE) both announcing they have signed formal buyout offers to privatize. In an interesting twist to the privatization story that has seen dozens of US-listed Chinese firms announce similar plans, Homeinns and Jiayuan are both being purchased by China-listed firms as part of their buyout deals.
That means that once the buyouts are consummated, both Homeinns and Jiayuan will immediately become publicly listed in China. Such a development would mark a rapid shortening of the time these companies would need to return to Chinese stock markets from the US. In the past, the small number of similar migrations was typically taking 2 years or more to complete. Read Full Post…
Bottom line: Richard Li’s investment in ZTE reflects the company’s improving position after an overhaul during the last 2 years, while Pony Ma’s sell-down of his Tencent stake looks like ordinary share selling by a company founder.
Pony Ma sells Tencent, Richard Li buys ZTE
A couple of stock sales are in the news as we head into the new week, led by Pony Ma’s sale of a massive HK$3.8 billion ($500 million) worth of shares in his company, social networking giant Tencent (HKEx: 700). While Ma was busy cashing out some of his stake, Hong Kong’s Richard Li, son of billionaire Li Ka-shing, moved in the other direction by boosting his stake in ZTE (HKEx: 763; Shenzhen: 000063), the telecoms company emerging from a major overhaul over the past 2 years.
Of these 2 moves, the latter is probably more significant since it marks a vote of confidence in the turnaround story of ZTE by Li, whose investment decisions are fairly well respected though nothing like those by his much better-known father. Pony Ma’s sell-down of his stake looks more routine, though it’s still a relatively large portion of his sizable holdings in China’s second most valuable Internet company, with a market value of $180 billion. Read Full Post…
Bottom line: Alibaba’s new announcement of expansion in France and Germany looks largely incremental rather than a major move, and is aimed at creating positive buzz around its international growth story.
Alibaba names France country head
E-commerce giant Alibaba(NYSE: BABA) is closing out 2015 with a couple of big new hires in Europe, as it tries to give investors new reason to cheer about its future growth prospects. But a closer read of the announcement detailing the hires of country chiefs in France and Germany reveals a distinctly Chinese story, rather than the global expansion tale that many investors are eagerly awaiting.
In this case, Alibaba is choosing to focus on how the new office openings in France and Germany will help merchants in those markets sell into China. That’s part of a broader trend that has seen Alibaba, archrival JD.com (Nasdaq: JD) and global names like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) try to offer more global brands to increasingly affluent Chinese consumers who are willing to pay more for these trusted names. Read Full Post…
Bottom line: Baidu’s disposal of its problematic music division looks like a smart move that was long overdue, while its new tie-up with Amazon looks minor but could get much bigger if it expands into the e-commerce sector.
Baidu in Christmas time tie-ups with Amazon, music company
Leading search engine Baidu(Nasdaq: BIDU) is in the headlines with a couple of big strategic moves, led by an intriguing new tie-up with Amazon (Nasdaq: AMZN) that could have broader implications in the e-commerce space. The other news has Baidu merging its problematic music division, which was historically plagued by piracy issues, into a new company headed by an entertainment firm called Taihe Music Culture Development.
Both moves represent incremental strategic tweaks for Baidu, as it tries to expand beyond its core online search business into other areas of the Internet. The Amazon alliance looks relatively superficial, but could hint at a broader future tie-up that might see the companies work together in China’s lucrative but highly competitive e-commerce space dominated by Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD). Read Full Post…
Bottom line: P2P lending platform operator Lufax will attract mostly state-owned investors for its latest $1 billion funding round, setting the stage for a 2016 Hong Kong IPO worth $2 billion or more.
P2P lender Lufax eyes $1 bln funding
It seems I may have underestimated the clout of peer-to-peer (P2P) lending platform operator Lufax when I said in August it could be eyeing a 2016 IPO in the neighborhood of $500 million. That IPO still looks likely to come next year, most likely in Hong Kong. But it could be much larger, based on reports of a new mega-funding that would value the company at a whopping figure of up to $20 billion.
The new valuation would mark a huge jump from earlier this year, when Lufax was valued at $10 billion after its most recent $500 million funding round in April. (previous post) The bigger picture is that China’s P2P lending sector is growing fast but also rapidly consolidating, as Beijing weeds out smaller players that have been accused of everything from fraud to other practices that put individual lenders at too much risk. Read Full Post…
Bottom line: Facebook’s plans for a Taiwan data center reflect its big hopes for Asia, and could portend its long-sought receipt of permission to open a China service next year through a local joint venture.
Facebook eyes Taiwan data center
As the rest of the world buzzes over Mark Zuckerberg’s new daughter and philanthropy plans, other media reports are providing new signals involving his ongoing aspirations to bring his Facebook (Nasdaq: FB) empire to the world’s biggest Internet market in China. In all fairness, those reports that Facebook is studying a plan to set up its first Asian data center in Taiwan don’t necessarily point directly to its separate China aspirations.
But Taiwan is certainly much closer to China than the US, and a data center there would make Facebook quicker for people in China to access if and when Beijing ever decides to open its doors to the world’s largest social networking service (SNS). That said, Asia is already a huge region for Facebook, accounting for about a third of its 1.5 billion users worldwide. Thus a data center in Asia makes sense for Facebook to better serve that base of about 500 million users. Read Full Post…
Bottom line: Alibaba and Tencent are likely to find themselves in a growing number of clashes in the year ahead due to consolidation involving their investments at home and a limited number of opportunities abroad.
Alibaba, Tencent back rival Korean Internet banks
In what’s shaping up as a trend for the year ahead, Tencent(HKEx: 700) and Alibaba(NYSE: BABA) are clashing once again in a newly announced South Korean Internet bank initiative in which both of China’s top Internet companies have an interest. It may be slightly overstated to call this particular instance a clash, since stakes held by Alibaba-affiliated Ant Financial and Tencent in 2 newly formed Korean Internet banks are probably quite small, probably at 5 percent or less.
But the reality is that these 2 Internet titans are increasingly clashing in a growing number of instances, as each invests in a wide array of areas to expand beyond their core businesses both inside and out of China. Those investments have put the pair in awkward situations in 2 of China’s largest Internet M&A deals this year, one involving the formation of hired car services giant Didi Kuaidi, and the other in a newer deal that has Meituan and Dianping merging to form a new leader in the group buying space. Read Full Post…
Bottom line: Beijing should eliminate barriers that are slowing the flow of private money into lending services, in a move to offset a slowdown in lending from traditional banks that are dealing with a growing bad-loan crisis.
Obstacles hinder private lending growth
A flurry of headlines last week highlighted the recent move by private companies into China’s financial services market, led by reports that Apple(Nasdaq: AAPL) could become the first major foreign company to offer electronic payments in the country. At the same time, a chilly reception for a Hong Kong IPO by regional lender Qingdao Bank (HKEx: 3866) highlighted the difficulties many traditional Chinese banks now face due to concerns about a looming bad debt crisis.
Beijing regulators should be commended for their recent efforts to open up the financial services market to more private investment, but should consider accelerating the campaign by streamlining bureaucracy for big and well-financed domestic and foreign names like Apple and Tencent(HKEx: 700). It should also consider a similar streamlining of bureaucracy for foreign banks, many of which have left China off their global roadmaps due to stiff restrictions that make doing business difficult. Read Full Post…
Bottom line: Uber’s 2016 China expansion plan looks aggressive but typical for the company, while Didi Kuaidi should invest its big cash pot on expansion and becoming profitable rather than unrelated services like O2O take-out dining.
Uber, Didi race towards 2016 with big investments
Private car service leaders Uber and Didi Kuaidi are both in the headlines as we race towards the end of 2015, a year that will go down as a watershed for this fast-rising sector both in China and globally. The first news comes from Uber, which is detailing an aggressive expansion plan for 2016 as China surpasses the US to become its largest global market. The second headline has Didi Kuaidi confirming a major new investment in online take-out dining site Ele.me, just days after separate reports said that e-commerce giant Alibaba(NYSE: BABA) also wants to invest in the company.
This year has certainly been a watershed for both Uber and Didi Kuadi in China, reflecting the rapid rise of their private car services that use location-based (LBS) GPS technology to challenge traditional taxi operators. Uber has said repeatedly that China is its top priority outside its home US market. Reflecting that position, Uber took the unusual step of spinning off its China unit into a separate company earlier this year, and also said it would spend $1 billion in 2015 to build up its service in the market. Read Full Post…
