Bottom line: Qihoo’s settlement of its dispute with Coolpad could ultimately see the former buy out their joint venture, leaving the latter open to a takeover by LeTV.
Qihoo, Coolpad settle JV dispute
Security software specialist Qihoo 360 (NYSE: QIHU) and smartphone maker Coolpad (HKEx: 2369) have announced a settlement in the spat over their troubled joint venture, though this hardly looks like the end of an entertaining story that has captivated China’s high-tech world for the last few months. This kind of settlement seemed likely, after Qihoo tried to forcibly sell its stake in the joint venture to Coolpad over claims that the latter had violated an anti-compete clause in their agreement.
Qihoo and Coolpad formed their joint venture last year, and Qihoo made its complaint after Coolpad later formed another smartphone manufacturing partnership with online video company LeTV (Shenzhen: 300104) in June. Now Qihoo says it has settled its dispute by agreeing to boost its stake in the Coolpad joint venture to 75 percent, giving it clear control of the enterprise. Read Full Post…
A brewing spat between security software giant Qihoo 360 (NYSE: QIHU) and struggling smartphone maker Coolpad (HKEx: 2369) has provided some good entertainment for followers of China’s vibrant Internet sector over the last few weeks. The tale has all the elements of a good trashy romance novel, including a love triangle and vengeful scheming by China’s most famous Internet bad-boy.
But more fundamentally, the tale is also filled with valuable lessons for anyone doing business in China’s high-tech sector, or really in any of the country’s emerging industries where private entrepreneurs are driving the growth. The story’s biggest moral is to be careful when choosing your business partners – a lesson that many private investors have learned over the last 3 decades as China transforms from a socialist system to a market-oriented economy. Read Full Post…
Bottom line: A threat to privatize Baidu by chairman Robin Li is probably the result of frustration at recent declines in the company’s stock and is unlikely to result in a serious buy-out bid.
Frustrated Robin Li threatens Baidu privatization
The biggest privatization threat to date by a US-listed Chinese company has just come from online search leader Baidu (Nasdaq: BIDU), whose chairman Robin Li is joining a growing chorus of executives who say their shares are underappreciated by Wall Street investors. In this case it’s easy to see why Li is unhappy, since Baidu’s stock has lost a quarter of its value since July, when the company reported a spending binge on new businesses had sapped its profits.
Baidu’s shares were actually down by an even greater 30 percent at the start of this week, but surged 6 percent in the latest session amid a broader rally for Chinese Internet stocks. It should come as no surprise that the US surge was sparked by a rally earlier in the day on China’s domestic stock markets, which is where Baidu and many of its other US-listed Internet peers say they would like to re-list. Read Full Post…
Bottom line: Stiff restrictions on private investment in Chinese financial services will hobble a new insurance tie-up for Ant Financial, and were likely a big factor behind the resignation of the head of Tencent’s young WeBank.
WeBank chief resigns
China’s 2 largest Internet companies are in the headlines for major new moves in financial service, reflecting the rapidly evolving picture for this newer part of their business. Alibaba (NYSE: BABA) was in the headlines for more positive developments, as its affiliated Ant Financial unit announced a new insurance tie-up with Cathay Financial (Taipei: 2882), one of Taiwan’s leading financial services companies. The news was less upbeat for Tencent (HKEx: 700), with word that the head of its young WeBank was leaving just 9 months after the bank’s launch.
Both of these stories reflect the huge potential financial services hold for big private companies like Alibaba and Tencent, as Beijing opens the sector to private investment. But at the same time, the newness of the opening means that many rules are unclear and sometimes even contradictory. Tencent has learned that lesson quickly with WeBank, which has faced major limitations in its early days. Read Full Post…
Bottom line: Contention around Meituan’s new mega-funding and Ele.me’s urgent desire to sell itself reflect overheated competition in the O2O restaurant services market, which could result in a major shake-up over the next 12 months.
Meituan denies rumors of funding collapse
Just a couple of days after reports emerged about the latest fund-raising by leading group buying site Meituan, the newest reports are painting a more chaotic scene in the sector for online-to-offline (O2O) services involving collaboration between web sites and restaurants. Meituan is once again in the news, though this time it’s denying rumors that its latest fund-raising has collapsed. Meantime, take-out dining delivery specialist Ele.me is also reportedly in frantic need of cash due to stiff competition gobbling up the industry.
This pair of stories reflects a cycle that’s all too common for emerging industries in China. That cycle typically sees one or two companies find success in a new business area, sparking a gold-rush that sees many others rush into the space. The result is always a surge in overcapacity, which is almost always followed by a shake-out that sees most companies close or withdraw from the business. Read Full Post…
Bottom line: Alibaba’s shares will remain under pressure through at least the end of the year, but could rebound after that and return to their IPO level or higher in 2016 as the bears lose interest and move on to their next victim.
Bears feast on Alibaba stock
Everyone has their good years and their bad ones, and 2015 is definitely shaping up as a year that e-commerce leader Alibaba (NYSE: BABA) would rather forget. After wowing investors with a record-breaking IPO a year ago, the company’s stock has been mauled in 2015 by a large stable of hungry bears, including the latest that emerged over the weekend in a report saying Alibaba stock could tumble further still.
That report from the well-respected financial magazine Barron’s sparked another sell-off for Alibaba’s shares when the new trading week began, pushing them close to record lows, even as the company issued a detailed rebuttal. I’ve had a look at Alibaba’s statement, and many of its points are legitimate though they do seem to miss the big picture. Read Full Post…
Bottom line: Beijing should be commended for taking a national approach to regulating private hired car services, and should continue to update its policies to reflect the rapidly changing sector.
Beijing welcomes Uber, Didi to compete with taxis
A rambunctious young group of Internet companies could soon receive legal status in China, with reports that Beijing is getting set to unveil new rules governing private hired car services as early as this week. Beijing should be praised for taking an even-handed approach and regulating these services that are creating unprecedented competition for taxis, rather than bowing to pressure from state-owned taxi companies that want the aggressive group of newcomers banned.
These newer services do need to be regulated to avoid crime and fraud that has plagued industry pioneer Uber and similar services in other parts of the world. But to outlaw such services, like some countries have done, would have cost China an opportunity to nurture a whole new industry, including the homegrown Didi Kuaidi that was valued at $16.5 billion after a recent funding. Read Full Post…
Bottom line: Intensifying competition in dining-related O2O services is pressuring Meituan to raise more funds, and the company should seriously consider a strategic alliance with Alibaba.
O2O dining wars dog Meituan
Online-to-offline (O2O) services have become the flavor of the day on China’s Internet, and take-out dining has emerged at the epicenter of a stampede by all 3 of China’s leading Internet companies to develop the market. Over the last 2 years, leading search company Baidu (Nasdaq: BIDU), e-commerce leader Alibaba (NYSE: BABA) and social networking giant Tencent (HKEx: 700) have all launched major initiatives in the space, collectively pouring hundreds of millions of dollars into the area.
Against that backdrop, the independent Meituan is emerging as an orphan in the space, since it’s the only player without a major backer despite its status as China’s top group buying site. That could explain the latest reports that say Meituan has returned to financial markets and is in the process of raising up to $2 billion in new funds, less than a year after it raised $700 million in another massive cash-raising exercise. Read Full Post…
Bottom line: Major new funding raising by Uber, its Chinese equivalent, and Alibaba’s logistics arm reflect continued interest in such leading Internet firms by major global Investors, though funding will slow sharply for smaller, less known players.
Three new Internet deals raise $5 bln
It seems my earlier forecast was incorrect that major fund-raising for Chinese Internet companies could be cooling due to waning investor sentiment during the recent market volatility. The latest headlines include 3 major new deal close to completion, worth a collective $5 billion. The largest has Didi Kuaidi, the homegrown Chinese equivalent of private car services giant Uber, on the cusp of new a funding deal worth $3 billion. The second has the actual Uber also near a deal to raise $1.2 billion for its Chinese business, as it prepares to spin off the unit into a separate company.
Meantime, the smallest of the deals has e-commerce leader Alibaba ‘s(NYSE: BABA) Cainiao logistics unit also on the verge of a deal to provide hundreds of millions of yuan for a small logistics company. In this case the move appears aimed at helping Cainiao to build up its stable of partners providing logistics service. The addition of such outsiders would also help to validate Alibaba’s 2-year-old program to plow 100 billion yuan into its logistics capabilities.
Bottom line: Alibaba’s latest sell-off is part of an ongoing correction in the company’s value, reflecting a new era of more realistic expectations from investors.
Bloom continues to shrivel from Alibaba’s rose
After years of basking in the hype of adoring investors who briefly valued it even higher than much-older and far more global rival Amazon (Nasdaq: AMZN), Chinese e-commcerce leader Alibaba (NYSE: BABA) has entered a new phase centered on more realistic expectations for the company. That new phase has seen Alibaba’s stock tumble to a more realistic level this year on a steady series of bad news, including the latest reports that one of its key sales metrics wasn’t as strong as previously estimated last quarter.
But that wasn’t the only bad news for Alibaba in the last few days. Earlier reports this week said the company was cutting back in its college recruitment, in what looked like another sign of slowing growth. (previous post) An Alibaba official seemed to refute those initial reports, only to have a second series of reports emerge that seemed to confirm that the recruitment slowdown was indeed happening. (English article) Read Full Post…
Bottom line: The next few months are likely to see a battle unfold for control of Coolpad, with Qihoo as the likely victor and a smaller chance that LeTV could emerge as a white knight savior.
Tug of war brews for control of Qihoo
What’s likely to become an entertaining battle for control of smartphone maker Coolpad (HKEx: 2369) has taken a new twist, with the company criticizing its joint venture partner Qihoo 360 (NYSE: QIHU) for being a control freak. The remarks from an unnamed Coolpad executive represent the first semi-official response to a surprise move by Qihoo to shut down their joint venture formed less than a year ago.
Qihoo’s said earlier this week that it planned to exercise a “put option” that would effectively shutter the joint venture, forcing Coolpad to pay $1.5 billion to buy out Qihoo’s stake. Qihoo said it was entitled to make the move after Coolpad violated a non-compete clause in their agreement by selling a major stake in itself to online video firm LeTV (Shenzhen: 300104), which was also planning a move into the smartphone business. But the struggling Coolpad can hardly afford the $1.5 billion price tag that Qihoo has said dissolution of the venture will cost. Read Full Post…
