Bottom line: A sell-off of JD.com shares after announcement of a big bond issue and a lukewarm debut for Yintech’s New York IPO reflect growing investor skepticism towards US-traded Chinese stocks due to the nation’s economic slowdown.
JD shares tank on mega bond sale
China startups may be all the rage among private equity investors in Asia, but they’re quickly losing their luster for smaller US-based investors. That seems to be the bottom line, following a lukewarm reception for the new IPO by a metals trading platform operator called Yintech (Nasdaq: YIN), and a plunge in shares of e-commerce giant JD.com (Nasdaq: JD) after it announced a major new fund-raising plan.
Neither of these stories surprises me too much, since China’s economy is standing on the cusp of a major slowdown that is likely to severely crimp all companies’ growth. But that said, it’s also noteworthy that private equity investors are still pumping billions of dollars into companies like Ant Financial and Didi Kuaidi even as sentiment cools on Wall Street. Read Full Post…
Bottom line: New IPOs from metals trading specialist Yintech in New York and aircraft leaser BOC Aviation will meet with lukewarm reception that sees them price in the middle of their range and post flat trading debuts.
Yintech banks on precious metals trading
A couple of IPO stories are in the headlines, including the first major offering of a Chinese company in New York this year set to take place by metals exchange operator Yintech. Meantime in Hong Kong, the airline leasing unit connected to Bank of China (HKEx: 3988; Shanghai: 601398) is also sniffing for interest in its plan for an offering to raise up to $1.5 billion.
Each of these IPO stories is quite different, in terms of size, industry and stage of development. But a common theme is that both come from relatively traditional older industries in China, rather than the high-growth tech and media sectors that more typically like to list offshore. To the contrary, this year has seen many of those high-growth companies like Qihoo (NYSE: QIHU) and E-House (NYSE: EJ) de-list from New York after failing to attract enough interest from US investors. Read Full Post…
Bottom line: Yum may sell control of its China unit to Chinese partners in a bid to become more local, while ZTE’s plans for a Nubia IPO reflect a growing emphasis on its younger, trendier smartphone brand.
China set to take control of local KFC?
A couple of big IPO stories are rippling through the headlines, led by word that an investor group headed by China’s sovereign wealth fund could buy control of the China unit of Yum Brands (NYSE: YUM), owner of the KFC fast-food chain, as it gets set for a spin-off and separate listing. This particular news marks a shift from previous reports that implied Yum would retain control of its China unit, even as it sold a major stake to big institutional investors.
While the Yum listing is likely to come later this year, another smaller but interesting deal has telecoms giant ZTE (HKEx: 763; Shenzhen: 00063) saying it plans to spin off and separately list its smartphone division that manufactures under the Nubia brand in the next 3 years. That hints that ZTE may be re-thinking its smartphone business, and perhaps preparing to slowly de-emphasize its older ZTE-branded phones in favor of its younger, higher-end Nubia line. Read Full Post…
Bottom line: Ant Financial could raise more than $22 billion in a 2017 IPO if China’s Internet bubble remains intact for the next year, though there’s a 50-50 chance that bubble will burst and the company’s value will stagnate or even come down.
Ant Financial targets massive dual listing
Just a week after reports emerged that it was nearing one the biggest fundings of all time by a private Chinese company, a new report is saying that Alibaba-affiliated (NYSE: BABA) Ant Financial is on the cusp of formally closing a massive capital raising of more than $3.5 billion. Flush with all that cash from only its second funding round, the company is looking quite confident and saying it hopes to make the biggest IPO of all time on a Chinese domestic stock exchange.
Specifically, the latest report in the influential China Business Network says Ant hopes to eclipse the current record held by the 2010 IPO from Agricultural Bank of China (HKEx: 1288; Shanghai: 601288), one of China’s big 4 state-run lenders. Ant’s offering could come as soon as next year in a dual listing in China and Hong Kong, following the surprise disclosure that Ant would meet the strict profitability requirements for such a listing . Read Full Post…
Bottom line: Focus Media’s first major fund raising and lofty valuation following its backdoor listing in China shows such homecomings can be lucrative, but are also very time consuming, complex and not guaranteed to succeed.
Focus Media in first cash raising since backdoor listing
Focus Media has just announced its first major cash-raising exercise since its privatization from New York and return to China through a backdoor listing, and the results look quite encouraging. The company said it plans to raise 5 billion yuan, or nearly $800 million, by issuing new shares after making the homecoming through a shell company called Hedy Holdings (Shenzhen: 002027).
But what’s really impressive is the valuation that Focus, a provider of advertising services, has gotten as it leads a group of Chinese companies that are abandoning New York listings to return home to China. According to data from 2 reputable websites, Hedy Holdings now has a market value of 150 billion yuan, or about $23 billion. If that’s correct, it would be nearly 6 times what Focus was worth when it launched its plan to privatize in 2012. Read Full Post…
Bottom line: Massive new fund raising by Ant Financial and Didi Kuaidi show there’s still lots of money looking to invest in emerging Chinese industries, though current valuations are overblown and likely to stagnate as China’s economy slows.
Ant Financial raises $3.5 bln
Every time I write that new funding seems to be cooling for Chinese tech companies, new reports emerge of yet another mega-funding. Two such new fund-raisings are in the headlines as the new week begins, led by a massive $3.5 billion new round for Alibaba-affiliated (NYSE: BABA) Ant Financial. The other mega-deal has homegrown car services provider Didi Kuaidi poised to raise $1.5 billion or more in new funding, as it vows to outspend an equally aggressive Uber for supremacy in the China market.
These 2 fundings show there’s still plenty of money chasing hot deals in China’s emerging industries, many in the tech and financial sectors. Two of my younger friends here have left more traditional media jobs over the last year to join the crowded field of private equity firms that are funding many of these deals, allowing hot companies like Didi Kuaidi and Ant to easily meet their targets and achieve very high valuations in the process. Read Full Post…
Bottom line: Homelink’s new mega funding reflects a recent renewed boom for Chinese real estate in major cities, while Alibaba’s backing of Momo’s buyout could presage a tie-up between Momo and Weibo.
Alibaba joins Momo buyout group
A couple of big fund-raising stories are in the headlines, led by the latest mega-funding for the fast-expanding real estate agent Homelink. Meantime, separate reports are saying that e-commerce giant Alibaba (NYSE: BABA) has joined a group aiming to privatize social networking app Momo (Nasdaq: MOMO), helping to squash skepticism that the buyout offer announced last year might collapse due to insufficient funding.
The only common thread to these 2 stories is that they show big funding remains available for high-growth companies in China, fueled in part by profits being generated by China’s booming real estate market. That boom has been directly responsible for Homelink’s meteoric rise, and seems like a good place to start this discussion of these 2 new mega fundings. Read Full Post…
Bottom line: A flurry of new de-listing activity shows that well-funded privatizations will continue despite market volatility in China, and could also spread to undervalued private companies listed in Hong Kong.
Wanda Commercial Properties eyes buyout
The headlines are brimming with new moves in the buyout wave that has swept over off-shore listed Chinese stocks, which are privatizing in droves due to disappointing valuations. Leading the news are 2 former high-flyers, online video site Youku Tudou (NYSE: YOKU), which has formally completed its buyout by e-commerce giant Alibaba (NYSE: BABA); and property giant Wanda Commercial Properties (HKEx: 3699), which has announced it is exploring a potential buyout less than 2 years after its Hong Kong IPO.
That pair are joined by 2 smaller stories involving ongoing privatizations by budget hotel operator Homeinns (Nasdaq: HMIN) and the shriveling Ku6 Media (Nasdaq: KUTV). Media are saying that Homeinns has already lined up a Chinese listing vehicle to resume its life as a publicly traded company after it de-lists from New York. And Ku6 has announced it has formally signed a buyout agreement that will result in its own de-listing. Read Full Post…
Bottom line: A surprise bid by China’s XIO Group for JD Power is unlikely to succeed due to lack of experience and possible concerns over a regulatory veto, but could force rival bidders to raise their offers slightly.
XIO joins bidding for JD Power
In what’s becoming an increasingly common occurrence, an obscure Chinese company has entered the bidding for a major western asset, with word that a buyout firm called XIO Group is eyeing US-based car industry consulting giant JD Power and Associates. I’m not too surprised by any of these bids these days, since many Chinese companies are flush with cash and under orders from Beijing to diversify beyond their home market.
These bids are pushing up the prices for global assets quite a bit, even as many such acquisition attempts ultimately fail. Both of those elements are present in this latest story, since Chinese bidders have become famous for attempting to buy top names like JD Power at any price, regardless of fundamentals of the acquisition target. But in the end, most of these Chinese bids are failing due to lack of experience and concerns about such foreign ownership. 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: Weak debuts for 2 China bank IPOs in Hong Kong and anemic profit growth for ICBC and Bank of China reflect the industry’s building bad loan problem, which could erupt into a full-blown crisis by the end of this year.
The headlines are littered with negative stories about Chinese banks as we reach the climax of the latest earnings season, reflecting the dismal outlook for this group of lenders staring at a major bad loan crisis. Often I like to be contrarian in this kind of situation and say it could represent a good buying opportunity, since Chinese bank stocks now trade at very low price to earnings (PE) multiples. But in this case I really do think far worse is still to come before the building crisis subsides, meaning there’s still plenty of downside for these stocks.
The bleak outlook was reflected by new Hong Kong IPOs for 2 local commercial lenders, whose shares both priced near the bottom of their range and ended flat on their first trading day. At the same time, 2 of China’s top 4 banks, ICBC (HKEx; 1398; Shanghai: 601398) and Bank of China (HKEx: 3988; Shanghai: 601398), both posted their latest quarterly results that continued to show their profits were sapped by growing bad debt. Read Full Post…
