Bottom line: Weibo’s investment in mobile video app Miaopai looks like a smart move to build on its recent momentum, while 58.com’s spin-off of its Guazi used car service is mostly a management restructuring.
58.com spins off Guazi used car site
A couple of web-related fund-raising stories are in the headlines today, though their relatively small size reflects investor sentiment that is rapidly fading towards these money-losing Internet companies. The bigger of the 2 deals has short video app Miaopai raising $200 million, in a funding round led by China’s Twitter-like Weibo(Nasdaq: WB). The second has leading online classifieds site 58.com (NYSE: WUBA) spinning off its Guazi used car businesses, in a move aimed at giving the company more flexibility to raise money for its future growth.
The $200 million figure is one of the largest we’ve seen in recent months, but is well below mega-fundings in the first half of this year when China’s stock markets were rallying and fundings of $1 billion or more were almost ordinary. But the flow of money has slowed sharply in recent months as investors get impatient for profits, forcing a number of former rivals into mergers to accelerate their drive to profitability. Read Full Post…
Bottom line: A new landscape in China’s O2O restaurant services market is taking shape around the “big 3” firms of Alibaba, Baidu and Tencent, with a Tencent-backed Meituan-Dianping the most likely to succeed.
Alibaba eyes Ele.me stake
We’re seeing more signs of a major shuffle in the China market for online-to-offline (O2O) dining services, with e-commerce leader Alibaba(NYSE: BABA) at the center of 2 major new developments in the space. One would see Alibaba invest $1.5 billion for about a third of Ele.me, the leader in O2O takeout dining services. The other has media reporting that Alibaba is looking to sell its 7 percent stake in Meituan-Dianping, China’s recently formed leading group buying site that operates a rival takeout dining service.
The big driver behind both of these stories is a major consolidation taking place in the O2O marketplace, where money-losing companies are suddenly scrambling to find wealthy backers after being cut off by their more traditional funding sources. Many of those companies have found a receptive audience from China’s cash-rich “big 3” Internet titans of Alibaba, Tencent(HKEx: 700) and Baidu (Nasdaq: BIDU). Read Full Post…
Bottom line: Xiaomi’s newest product launch focused on cheap smartphones and LeTV’s scrapping of an IPO for its film-making unit reflect fading prospects for these former superstars due to stiff competition.
Xiaomi rolls out more bargain phones
Former Chinese superstars Xiaomiand LeTV (Shenzhen: 300104) are in the headlines with new setbacks, reflecting the meteoric rises and equally fast falls that China is producing in its own version of the dot-com bubble. But this bubble has distinctly Chinese characteristics, and is coming in a more mature Internet where rampant competition and copycatting make it very difficult to make profits.
The first headline has Xiaomi rolling out 3 of its newest smartphones that are decidedly low-end, representing a big setback for the company’s drive to produce higher-end models that have fatter profit margins. The second headline has LeTV scrapping a plan to make a separate listing for its filmed entertainment unit, a year after hyping a new IPO that it hoped could mimic the meteoric rise in its own stock earlier this year. Read Full Post…
Bottom line: Jack Ma is unlikely to tamper with content at the South China Morning Post if he buys a stake in the iconic Hong Kong newspaper, but instead will look for ways to leverage its content using more dynamic new media platforms.
Jack Ma eyes HK newspaper stake
A sketchily-sourced report from 2 weeks ago is suddenly getting major new credibility, with word that Alibaba(NYSE: BABA) founder Jack Ma is near a deal to take a major stake in Hong Kong’s SCMP Group (HKEx: 583), publisher of one of Asia’s oldest and most profitable English language newspapers. The biggest twist in the latest reports is that Ma himself and not Alibaba would invest in SCMP, owner of the South China Morning Post newspaper.
The earlier reports were based on a story citing vague rumors that Ma was in talks with the SCMP, leading me to say that such a move looked logical even if sourcing in the reports was quite shaky. (previous post) The newest report has far more solid sourcing and comes from the reputable Bloomberg, meaning the chances are high that a deal is really happening. Read Full Post…
Bottom line: Tuniu’s new tie-up with HNA looks like a smart move that could position it as a leading provider of resort vacation packages, and could also signal the rise of a meaningful rival to industry leader Ctrip.
Tuniu travels to Hainan with HNA
Leading online travel site Ctrip(Nasdaq: CTRP) has emerged as the loser in a recent bidding war for a stake in smaller rival Tuniu (Nasdaq: TOUR), which has just announced a new alliance that will see it receive a $500 million investment from one of China’s top traditional travel companies. This latest in a recent flurry of deals from the travel space will see HNA Tourism get about a quarter of Tuniu’s shares for its investment, making it Tuniu’s largest shareholder.
HNA Tourism is a unit of HNA Group, one of China’s more dynamic state-run investors that is also parent of Hainan Airlines (Shanghai: 600221), one of the country’s best-run airlines. Based in the tourism-friendly island of Hainan, HNA certainly looks like a logical and well-connected partner for Tuniu, even though media were reporting last week that the more entrepreneurial Ctrip was in talks for a similar deal. (previous post) Read Full Post…
Bottom line: Google should follow the example set by LinkedIn and Apple and be more transparent when it returns to China, and should work with Beijing to forge a more constructive relationship.
Google eyes China return in 2016
One of the strongest signals yet that Google (Nasdaq: GOOG) could soon return to China came late last week, when media reported the company was aiming to open a Chinese version of its Google Play app store next year in accordance with relevant Chinese laws. Such a move would represent an important improvement in the company’s relationship with Beijing, coming 6 years after Google shuttered its China-based search service due to a disagreement on self-policing policies that apply to all sites in China.
The shift is being driven by both sides, amid a realization that they can work together constructively to each other’s benefit. Google’s realizes that China is a market it can’t afford to ignore, with the world’s largest base of 600 million Internet users and 1.3 billion mobile subscribers. Beijing also realizes that a high-tech giant like Google can bring important technology and know-how to the country, whose large stable of smartphone makers already rely heavily on Google’s free Android operating system (OS). Read Full Post…
Bottom line: A new alliance between some of China’s largest hotel operators is the latest reaction to Ctrip’s growing clout in the travel services sector, and could lead the anti-trust regulator to take remedial action next year.
Hotel operators band together against Ctrip
An increasingly powerful Ctrip(Nasdaq: CTRP) is in the headlines as the new week begins, with word that some of China’s top hotel operators are banding together to protest what they see as unreasonable demands by the online travel services giant. News of this action is once again spotlighting Ctrip’s recent purchase of big stakes in nearly all of its major rivals, in a bid to reduce the rampant competition that has plagued the industry over the last 2 years.
I wrote about this issue just last week, when media reported that Ctrip was in talks to take a stake in travel package site operator Tuniu (Nasdaq: TOUR), one of the few major players that doesn’t have an equity alliance with Ctrip. (previous post) I observed that such a tie-up would help Ctrip by neutering one of its last major domestic rivals. That could ultimately draw the attention of China’s anti-trust regulator, which until now hasn’t taken any action to break-up near monopolies in many of the country’s Internet spaces. Read Full Post…
Bottom line: Chinese video- and entertainment-related companies will continue to attract big investments and valuations over the next year due to their strong growth potential, even as sentiment cools towards other new media companies.
Mango TV eyes major new funding
Investor sentiment may be rapidly cooling towards many Internet areas in China, but entertainment is one that still remains quite popular. That’s my latest read on the markets, following news of major new financing for 2 companies and a new Sino-foreign co-production deal in the hot video and movie-making sectors.
Up-and-coming online video operator Mango TV is at the center of the biggest news in terms of value, with media reporting it’s aiming to raise a hefty 20 billion yuan ($3.2 billion) in just its second funding round. Movie ticket booking app Weiying Shidai is in a smaller but still sizable fund-raising headline, with reports that it has just raised 1.5 billion yuan in its third funding round. Last but not least is word of a film co-production deal between local studio Huace (Shenzhen: 300133) and global giant Twenty-First Century Fox (Nasdaq: FOX). Read Full Post…
Bottom line: Momo may be reconsidering its de-listing plan as it approaches profitability and becomes comfortable in New York, while Shanda’s final de-listing testifies to the resourcefulness and tenacity of founder Chen Tianqiao.
Shanda NY listing nears end game
Two companies aiming to de-list from New York are in the headlines as the weekend approaches, led by word that Shanda Games (Nasdaq: GAME) is finally packing its bags and heading home after a long and difficult privatization process lasting nearly 2 years. At the other end of the spectrum is social networking app maker Momo (Nasdaq: MOMO), which was aiming to capture the record for shortest life as a US-listed company when it announced a privatization bid in June just 7 months after its Nasdaq IPO.
I’ve written quite a few times about Shanda Games’ imminent de-listing, only to see the buyout derail for different reasons. But this time it really does look final after shareholders approved a buyout deal that has now formally closed. (company announcement) Meantime, Momo has just announced quarterly results that show it is almost profitable. But what’s perhaps equally interesting is the lack of any mention of its own previously announced buyout offer in the report, which could perhaps imply a change of direction. Read Full Post…
Bottom line: Baidu’s new joint venture bank with Citic could help it catch up to stumbling private banks backed by Tencent and Alibaba, which are struggling due to restrictions on their operations by Beijing.
WeBank seeks new funding
Two headlines are highlighting the opportunities and challenges that private banking is presenting for China’s Internet giants. The larger of the news items has online search leader Baidu(Nasdaq: BIDU) forming a joint venture with traditional banking giant Citic Bank (HKEx: 998), as it plays catch-up with Internet rivals Tencent(HKEx: 700) and Alibaba(NYSE: BABA). The second headline involves Tencent’s recently formed WeBank online bank, which is reportedly looking to raise $1 billion nearly a year after its official launch.
China’s Internet companies have rushed into financial services over the last 2 years, as Beijing tries to breathe new life into a stodgy sector previously dominated by big state-run firms. Both Tencent and Alibaba have been at the forefront of the movement, with each getting licenses to open private banks earlier this year under a new pilot scheme. But the transition has been filled with obstacles, partly due to lack of regulation but also because of resistance from the traditional banks. Read Full Post…
Bottom line: Innovation Works’ China OTC IPO plan shows the year-old small-cap board is rapidly becoming a popular place to list for money-losing companies that might have previously gone to New York.
Innovation Works files for China OTC listing
China’s year-old over-the-counter (OTC) market is suddenly becoming the hot place for new listings by young tech firms, with word that the technology incubator founded by Google’s (Nasdaq: GOOG) former China head has become the latest in a recent string of companies to file for listings there. The OTC application by Innovation Works highlights a new path to market for money-losing Chinese companies that might have previously chosen to list in New York.
The main stock exchanges in China and Hong Kong don’t allow money-losing companies to list, with the result that many private start-ups used to go to New York where profitability isn’t a requirement. But New York investors are also increasingly showing lack of interest in money-losing Chinese firms, causing their shares to languish and some like online video site Youku Tudou (NYSE: YOKU) to sell themselves and de-list. Read Full Post…
