Bottom line: A flurry of lawsuits alleging undervaluation in the latest buyout offer for US-listed Chinese firm Synutra could signal growing new resistance to low valuations for many other existing offers.
Lawfirms pan Synutra buyout offer
The law firms that make their money by suing publicly traded companies have found a new reason to sue, taking aim at the dozens of Chinese firms now trying to privatize from New York. This new wrinkle in the wave of privatization bids for US-listed Chinese companies comes after infant formula maker Synutra (Nasdaq: SYUT) became the latest to get an offer from a management-led group to take the company private.
This marks the first time I’ve seen so many lawsuits threatened after a company announced the receipt of a buyout offer, with at least 3 firms saying the offer undervalues the company. Up until now, we’ve only seen minor shareholder resistance to most buyout offers, even though many of the buyers are taking advantage of depressed valuations for the companies being privatized. Read Full Post…
Bottom line: Sina’s latest board reduction to just 5 members looks like a strategic move by Chairman and CEO Charles Chao, as he prepares a sale that will give him a major executive position at his company post-merger.
Sina board shrinks to just 5 members
The share price isn’t the only thing shrinking these days at leading web portal Sina (Nasdaq: SINA). The board of one of China’s oldest Internet companies has also just undergone a major reduction, with 2 of its 7 members leaving without any sign of replacements. I’m not extremely familiar with Sina’s board and its dynamics, but it does seem like 5 members is quite small for a company of Sina’s size and could reflect a power play by longtime Chairman and CEO Charles Chao.
Such a play could be prelude to the sale of Sina to a rival, with e-commerce giant Alibaba (NYSE: BABA) as the most likely candidate. I’ve been predicting such a sale for a while now, and this latest move looks like the latest signal that Chao could be clearing out board members who might oppose such a deal. With just 5 members left on the board, Chao would only need 2 to agree with him to approve a deal that he would personally negotiate. Read Full Post…
Bottom line: Starbucks and Uber are likely to scale back their latest aggressive China expansion plans as the nation’s economy slows and consumers rein in their spending on non-essential items and services.
Starbucks accelerates China expansion
China’s economy may be heading for a new era of slower growth, but you would never know that by looking at the latest moves by Uber and Starbucks (Nasdaq: SBUX), 2 global leaders in their categories of hired car services and retailing. The first instance has Uber completing a major fund-raising for its China unit and forming a new tie-up in travel services. Meantime, Starbucks is steaming ahead with plans to nearly double its China store count by 2019.
As a neutral observer of both companies, I have to say that both Starbucks and Uber are being just slightly naive in ignoring all the signs of a major Chinese economic slowdown that could ultimately lead to woes now confronting countries like Greece and Spain. In that kind of environment, it’s far from clear that consumers will still enthusiastically shell out $5 for a cup of coffee at Starbucks when they could buy a cup of tea for far less, or that they will pay similar amounts for a hired car instead of taking the bus or subway. Read Full Post…
Bottom line: Vipshop shop shares could see some upside if the company improves its public relations and its revenue and profit growth stabilize at current levels.
Vipshop dogged by fake liquor scandal
A scandal involving pirated liquor is cooling down former e-commerce high-flyer Vipshop (NYSE: VIPS), in an episode reminiscent of a much larger brouhaha that devoured sector leader Alibaba (NYSE: BABA) almost exactly a year ago. In this case, the scandal involving fake Moutai liquor has been dragging on for more than 2 weeks now, and the latest development has Vipshop apologizing for its lack of transparency in handling the incident.
Some are saying this particular scandal could just be the tip of the iceberg, and that numerous other fake products could be lurking on Vipshop’s website that specializes in bargains for lesser-known brands. But in my view, slowing growth is the real cause for concern among Vipshop investors, many of whom are taking advantage of this news as an excuse to sell their stock. Read Full Post…
Bottom line: Alibaba’s shares and Ant Financial’s new fund-raising plans will come under pressure if China’s stock markets enter a new correction, a possibility that looks high in the current environment.
China sell-off pressures Alibaba shares
E-commerce giant Alibaba (NYSE: BABA) is facing several new challenges as we head into 2016, led by a big drop in its stock on the first trading day of the year after China’s domestic stock markets plunged 7 percent. The 5.6 percent drop in Alibaba’s stock in New York on Monday wiped out around $10 billion in market value, as investors worried that US-listed Chinese stocks could get infected by a potential a new correction on China’s stock markets.
In separate headlines, Alibaba-affiliated Ant Financial is reportedly back in the market to raise at least $1.5 billion, in the run-up to a potential IPO as soon as later this year. That figure looks quite large, and I’ve previously said we’re unlikely to see many private fund-raising rounds of that size this year. But the figure is actually down quite a bit from Ant’s only other fund raising last July, reflecting growing caution from investors worried about China’s slowing economy. Read Full Post…
Bottom line: Alibaba is placing its take-out dining service bets on Ele.me with its new $1.25 billion investment, and will spend other major resources next year to try to clean up its sites of trafficking in fake goods.
Alibaba invests in Ele.me
E-commerce juggernaut Alibaba (NYSE: BABA) is back in the M&A market, gobbling up a headline-grabbing 28 percent of leading online-to-offline (O2O) take-out dining service Ele.me for a tidy $1.25 billion. Alibaba has yet to confirm the deal, which would become the latest in a growing string of investments worth $1 billion or more for the company. A deal of this size would have been major news just 3 years ago before a wave of M&A began sweeping China’s Internet, though now such transactions have become far more common.
Meantime, Alibaba is in another set of headlines in its battle against piracy, with word that it’s adding 200 people to the team charged with ridding its huge online marketplaces of trafficking in pirated goods. This particular move comes less than 2 weeks after Alibaba managed to avoid seeing its name reappear in an annual US list of the world’s most notorious marketplaces for trafficking in pirated goods. Having dodged that bullet, Alibaba is now showing it plans to get far more serious in tackling the problem next year. Read Full Post…
Bottom line: Apple should put out a short statement to answer online chatter that its new China headquarters looks like an older software park in Shandong, while Alibaba’s latest high-profile hire is its own move to tackle piracy on its sites.
Alibaba prioritizes piracy in 2016
A trio of piracy-related stories are in the headlines as we head into year-end, reflecting the recent focus that Beijing has put on an issue that is likely to get big attention in 2016. Leading the news are online observations by some web surfers that Apple’s (Nasdaq: AAPL) new China headquarters building bears a striking resemblance to a much older software park in northeastern Shandong province.
Next there’s the announcement of a major new anti-piracy hire by e-commerce juggernaut Alibaba (NYSE: BABA), which dodged a bullet last week by keeping its name off an annual US list naming the world’s most notorious markets for pirated goods. Alibaba’s new announcement has seen it name a former top Apple investigator to lead a renewed campaign to rid its online marketplaces of trafficking in pirated goods. Read Full Post…
Bottom line: Suning’s move into sports is aimed at providing content for its PPTV online video service, but is also the latest in a string of wide-ranging investments that reflect a company with an identity crisis.
Suning invests in soccer
Sports teams are becoming flavor of the day for Chinese firms with entertainment aspirations, with word that retailing giant Suning (Shenzhen: 002024) has joined the bandwagon via a new investment in a local soccer club. The company’s latest deal will see it invest 523 million yuan ($80 million) in the Jiangsu Sainty Football Club, which like many other professional Chinese sports teams is struggling financially.
Suning’s interest in soccer is probably related to its 2013 purchase of PPTV, a relatively large player in China’s crowded online video space. The Suning-PPTV tie-up left many people puzzled at thee time of that announcement, since the 2 companies have little in common. But Suning has been aggressively promoting the service in its trademark consumer electronics stores, and in August it announced a plan to invest 1 billion yuan into a campaign to sell smart TVs equipped with PPTV’s online video service. Read Full Post…
Bottom line: Alibaba is the biggest winner by keeping its name off an annual US piracy list, but the victory is only partial due to a strong warning in the report to improve its anti-piracy efforts.
US warns Alibaba to step up anti-piracy actions
After months of behind-the-scenes lobbying in Washington, e-commerce giant Alibaba (NYSE: BABA) has managed to keep its name from reappearing on an annual US list of “notorious” global markets for piracy that has just been published. But the victory is really only partial, since the US Trade Representative’s (USTR) office has devoted quite a lot of space to Alibaba in the latest edition of its Notorious Markets report, expressing its concerns about the rate of trafficking in pirated goods on some of Alibaba’s sites.
This long-awaited decision appears to be a compromise, aimed at appeasing some groups that wanted to see Alibaba’s name reappear on the list, including the American Apparel & Footwear Association, which issued several strongly-worded statements on the matter. The matter put the USTR in an awkward position, because it had previously removed Alibaba’s name from the list in 2012, only to see Alibaba strongly criticized for continued rampant piracy by Beijing early this year. Read Full Post…
Bottom line: Yum’s plan to potentially list its China unit in Hong Kong, alongside a concurrent New York listing, looks like a smart move that would make the stock more accessible to Asian investors and give it a more local flavor.
Yum eyes HK listing for China unit
The struggling China unit of Yum Brands (NYSE: YUM), owner of the KFC and Pizza Hut chains, has just released a slew of new details on its prospects, including a long-awaited return to same-store sales growth after several years of declines. The announcement comes as Yum, under shareholder pressure, prepares to spin off its China operations into a separately listed company.
Apart from the new forecast for a return to same-store sales growth, one of the most interesting China-related details in the new announcement is the potential for a Hong Kong listing by Yum’s China unit as part of the spin-off. That move would make Yum China’s shares available to many mainland Chinese investors, and would also add a distinctly Asian flavor to a company that has now seen as a downscale purveyor of greasy western fast food. Read Full Post…
Bottom line: Beijing should make investigators be more transparent when making publicly visible moves like detaining company executives, or risk financial turmoil when markets are left to try and guess what’s happening.
Transparency needed when big execs are detained
Beijing’s anti-corruption campaign took an unexpected turn into the private sector last week with the sudden disappearance of Guo Guangchang, one of China’s richest men and chairman of one of its most successful private conglomerates, Fosun Group. Word of Guo’s disappearance sparked widespread speculation and also some panic among investors in his dozen listed companies, forcing the group to scramble for answers to avoid financial chaos.
The case highlights the need for greater transparency by anti-graft investigators as they dig deeper into China’s corporate realm to root out corruption that has become all too common in the nation’s business culture. Read Full Post…
