Bottom line: Xiaomi’s and Wanda’s moves into financial services look logical but a bit late, and could struggle to compete with earlier initiatives from the likes of Alibaba, Tencent and Baidu.
Xiaomi joins partners in new bank plan
With just about all the major Internet players moving into financial services, it’s been somewhat surprising that smartphone sensation Xiaomi hasn’t joined the trend yet. The same can be said for Wanda Group, which is moving beyond its traditional strength in real estate with plans for a major e-commerce venture and plays in the entertainment space.
That looks set to change soon, however, with separate reports saying both Xiaomi and Wanda are planning moves into China’s financial sector that is being opened to private money after years of domination by big state-owned companies. Xiaomi’s move comes in an announcement from an obscure company called Hebang Corp (Shanghai: 603077), which says the pair are part of a group that plans to open a privately funded bank. Meantime, Wanda’s plan comes in a report citing company chief Wang Jianlin saying he is planning to make some major purchases in the financial services arena. Read Full Post…
Bottom line: Chinese companies should follow the lead of Huawei, Baidu and Tencent in fighting internal corruption, but Beijing should also play a role by ensuring such probes don’t become a weapon for companies to attack each other.
Tencent corruption probe nets former video exec
The growing clampdown on corruption at private Chinese companies was in the headlines last week, when Internet giant Tencent (HKEx: 700) disclosed that it was investigating half a dozen employees suspected of accepting bribes. But unlike other similar probes that have been growing in number over the last year, this particular one involved former Tencent employees, including one now working as a top executive for Internet rival Alibaba (NSYE: BABA).
Such corruption and other economic crimes have no place in a healthy corporate landscape, and leading Chinese high-tech names like Huawei, Baidu (Nasdaq: BIDU) and now Tencent should be commended for their efforts to stamp out the problem. But Tencent’s targeting of a high-level employee who went to work for a rival is also slightly troublesome, as it shows that companies could use such probes as a weapon to punish workers who defect to their competitors. Read Full Post…
Bottom line: Baidu’s new $200 million investment in its take-out dining service is likely to be followed by a sale of the platform to its Nuomi group buying unit, as part of its effort to build up an O2O company to compete with Dianping.
Baidu pumps up take-out dining site
Online search leader Baidu (Nasdaq: BIDU) continues to play catch-up to leading group buying sites Meituan and Dianping, with word that it’s investing a fresh $200 million in its young Internet-based take-out dining service. The move comes just weeks after e-commerce leader Alibaba (NYSE: BABA) announced a similar move to boost its own take-out delivery service, and as Tencent-backed (HKEx: 700) Dianping boosts its own early lead in the space through its Ele.me take-out delivery unit.
All of these companies are scrambling to build up their online-to-offline (O2O) businesses, which bring together Internet-based platforms for services like ordering food and merchandise, with real-world retailers like restaurants and department stores. Tencent is clearly placing its O2O bets with Dianping, which began life as a restaurant ratings site but has moved into a growing number of related areas like group buying and take-out delivery. Read Full Post…
Bottom line: Alibaba-affiliated Ant Financial is experiencing breakneck growth through its roll-out of a wide array of new products and services, and could be valued at up to $150 billion by the time it makes its IPO as soon as next year.
Ant Financial in Alipay offline campaign
A new report is spotlighting the rapid rise of Ant Financial, the financial services affiliate of e-commerce giant Alibaba (NYSE: BABA) that looks set to challenge not only domestic rival UnionPay but also upcoming drives into China by global giants Visa (NYSE: V) and MasterCard (NYSE: MA). Much of Ant’s incredibly rapid rise is tied to its core Alipay asset, which began life as an electronic payments service but is rapidly moving into other areas like credit card-style offline payments and savings account services.
The latest reports also contain a new figure on Ant’s valuation following its first major capital raising. That figure of $45 billion is substantially larger than an earlier figure of $30 billion that was contained in initial reports on the funding just a week ago. (previous post) But those earlier reports also pointed out the low valuation was based on shares that were probably sold at a discount to a big domestic institutional investor, perhaps for strategic reasons, and that the real value could be as high as $50 billion. Read Full Post…
Bottom line: The detention on suspicion of corruption of a former Tencent executive now working at Alibaba shows that Chinese Internet companies could use such internal probes to disrupt business at their rivals.
Former Tencent worker detained for corruption
Chinese tech companies are getting increasingly aggressive in their campaign to root out internal corruption, with word that Tencent (HKEx: 700) is probing current and former employees from its video unit for accepting bribes. But what’s most interesting about this latest anti-corruption drive is that one of the executives detained by police now works at the entertainment unit of Tencent rival Alibaba (NYSE: BABA). That element of the case reflects the fact that executives at China’s leading Internet companies often move between each other, in a job-hopping phenomenon that is relatively common in China.
But the move also reveals a potentially potent weapon that companies like Tencent could use in the future to try and disrupt business at their rivals. We saw a similar case just last year, when online game giant NetEase (Nasdaq: NTES) made allegations against one of its former employees who left to start social networking app Momo (Nasdaq: MOMO), causing major headaches for Momo on the eve of its New York IPO. Read Full Post…
Bottom line: New buyout bids for Dangdang and YY look opportunistic due to a recent sell-off in their shares, while Baixing.com could lead a new wave of domestic IPOs for Chinese Internet firms next year.
Dangdang gets buyout offer
A few lingering buyout offers for US-listed Chinese firms are trickling in after Thursday’s market rally in China, with e-commerce stalwart Dangdang (NYSE: DANG) and the newer social networking site YY (Nasdaq: YY) both announcing new privatization plans. These 2 announcements look quite opportunistic, as they come after a sell-off that has seen Dangdang and YY’s shares plunge over the last 2 weeks, but right after a major one-day China rally that spilled over into the US.
At the same time, online classifieds site Baixing.com is charting a path for the future, with word that it’s scrapping its variable interest entity (VIE) structure that is typically used for Chinese firms looking to list in New York. The company is reportedly making the move as it eyes a domestic Chinese listing instead, and also as it receives new funding from online search leader Baidu (Nasdaq: BIDU). Read Full Post…
Bottom line: The move by a Ctrip vice president to the role of CEO at eLong represents growing ties between the 2 companies, with the former likely to make a buyout offer for the latter within the next year.
Ctrip exec takes over at eLong
A new executive move between online travel leader Ctrip (Nasdaq: CTRP) and the smaller eLong (Nasdaq: LONG) shows the pair of former rivals are moving closer together, hinting at a potential outright merger in the not-too-distant future. Such a merger would have been major news just 5 years ago, when this pair of companies were the 2 clear leaders in China’s online travel sector.
Since then, however, eLong has sputtered under the ownership of US travel giant Expedia (Nasdaq: EXPE), which finally called it quits in May and sold its stake in the Chinese company. (previous post) Ctrip was quick to jump in and purchase 37 percent of eLong for $400 million, and has now moved even closer to its former rival with this new executive move. Read Full Post…
Bottom line: Tencent’s new bond issue and Meituan’s $1 billion fund-raising plan are likely to mark the end of a wave of massive capital raising, as investors pause until China’s financial markets stabilize.
Meituan eyes new $1 bln fund-raising
China’s stock market turmoil may have brought an abrupt end to the booming IPO markets in Shanghai, Shenzhen and Hong Kong, but it hasn’t completely killed investor appetite for hot Internet companies. That’s the conclusion one could draw based on the latest series of mega-deal announcements, including a record $2 billion fund-raising by hired car services app operator Didi Kuaidi.
That fund-raising was formally announced the same day that reports emerged saying leading group buying site Meituan was aiming to raise another $1 billion, less than a year after it raised $700 million. Last but not least, social networking giant Tencent (HKEx: 700) is preparing to raise $100 million of its own, announcing it has just priced the latest tranche of bonds in a previously announced program to issue up to $10 billion in new debt. Read Full Post…
Bottom line:Weibo’s new micro-showcasing e-commerce initiative looks well-conceived and could stand a good chance of success, but the company needs to move faster if it wants to compete over the longer term with more aggressive rivals.
Weibo & E-Commerce in China
Weibo launches new e-commerce initiative
After posting profits in the last 2 quarters, early social networking (SNS) leader Weibo (Nasdaq: WB) is aiming to bolster its longer-term residence in the black with a new drive into the lucrative but also highly competitive e-commerce space. The move looks a bit late, since many were hoping for quicker moves into e-commerce for Weibo 2 years ago after its landmark tie-up with sector gorilla Alibaba (NYSE: BABA).
But the cautious Weibo was never one to move too quickly, and in this case its newest initiative actually looks quite well conceived and customized to fit the usage patterns of its subscribers. That means it could have a good chance of success, perhaps helping to lift the company’s sagging stock. But that said, Weibo will still have to vie with similar services from a faster-moving Tencent (HKEx: 700), which is aggressively rolling out e-commerce services tied to its popular WeChat social networking (SNS) platform. Read Full Post…
Bottom line: The accelerating sell-off for US-listed China shares looks overblown and stocks are likely to rebound once the panic subsidies, but many previously announced buyout bids are still likely to collapse.
Ailing Chinese stocks infect US
The panic gripping China’s stock markets is spreading to US-listed Chinese shares, with even Internet blue chips like Baidu (Nasdaq: BIDU) and Alibaba (NYSE: BABA) getting sucked into the vortex of what looks like increasingly irrational selling. One media report is pointing out that tycoons like Tencent (HKEx: 700) and Alibaba founders Pony Ma and Jack Ma have seen their fortunes shrink by hundreds of millions or even more than a billion dollars in the latest trading day of the ongoing sell-off.
Another report cites China-based asset managers saying that a flood of privatization plans for China-listed US firms will still move forward despite the growing panic. Their optimism contrasts with growing skepticism among US investors who fear that many of the plans will collapse in tandem with China’s own crumbling stock markets. Anyone who agrees with those asset managers could make some big money right now, as the plummeting US stock prices mean many of these buyout candidates are now trading as much as 40 percent below their offer prices. Read Full Post…
Bottom line: Ant Financial’s valuation looks low but reasonable based on its first major fund raising, and the figure is like to triple or more by the time it makes its domestic IPO in around the next 2 years.
Ant Financial gets low valuation in new funding
After months of negotiations, Alibaba (NYSE: BABA) affiliated financial services unit Ant Financial has finally closed its first major funding round as it revs up a campaign to challenge established state-run banks. But what most surprised me in the latest reports were the low valuation that Ant got from the funding, with the final figure coming in far below all of the earlier forecasts.
The moral of the story is that Ant Financial and other similar privately funded financial services companies still have big potential. But limitations that restrict such companies from seeking foreign investment are likely to limit their valuations, since only a small field of domestic Chinese institutional investors have big enough sums of money to finance high-growth companies like Ant. Read Full Post…
