Jingdong Mall, LaShou: Turmoil in Cyberspace 京东商城、拉手网：互联网领域混乱

By newsdoug on June 20, 2012

The latest signs of trouble in China’s overheated Internet sector are bubbling into the headlines again, with word that group discount leader LaShou has scrapped its troubled IPO while another high level executive has resigned from e-commerce giant Jingdong Mall, also known as 360Buy. Both developments have some company-specific issues behind them, but more broadly speaking they also reflect an overheated China Internet that has seen internal turbulence grow at many companies as they struggle for dominance and simply survival.

Let’s look at LaShou first, which has formally withdrawn its application for a New York IPO, ending a protracted process that began more than half a year ago. (Chinese article) There’s not much news in the filing with the US securities regulator, besides simple statement of the fact that LaShou has withdrawn its application for a process that has been highly troubled from the start.

LaShou first filed for the IPO last October, hiring several second-tier investment banks to underwrite the deal after major names like Goldman Sachs (NYSE: GS) reportedly avoided the deal over concerns about LaShou’s accounting. (previous post) LaShou later withdrew that application after the US securities regulator also reportedly raised its own questions. The company then restarted the offering process early this year despite a chilly climate in New York for China Internet companies that forced another recent last-minute withdrawal for an IPO by car rental specialist China Auto. (previous post)

Apparently the climate was also too chilly for LaShou, which is quickly burning through its cash and has reportedly seen a recent mass resignation of top executives as it lays off employees in large numbers. (previous post) This formal withdrawal of its IPO means that LaShou has given up on this last potential plan to raise desperately needed new cash, and I wouldn’t be surprised to see the company either close or sell itself for an extremely low price to a competitor before the end of summer.

Meantime, new signs of turbulence are also emerging at Jingdong Mall, with word that the company’s vice president of technology has left the company. (English article) That news comes just days after the company confirmed that another top executive, its chief strategy officer, left several months ago. (Chinese article)

Such high-level departures certainly don’t look good for a company that is reportedly preparing to make an IPO sometime this fall, based on recent reports, even though Jingdong’s founder and chief executive early this year denied any such plan.

My main conclusion from all these repeated mixed signals is that Jingdong Mall is a company in turmoil, which I suspect is the result of different opinions between its CEO and shareholders who last year invested more than $1 billion in the company. That cash infusion means that Jingdong probably doesn’t desperately need cash like LaShou, but still bodes poorly for its upcoming IPO, if and when it finally happens.

Bottom line: LaShou’s withdrawal of its IPO application could portend the company’s imminent demise, while Jingdong Mall’s latest executive departure reflects internal turmoil.

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