LaShou: End Near With CEO Departure CEO离职，拉手网接近尾声
The steady stream of executive departures at the ailing LaShou has reached a new high with the resignation of the company’s CEO, in the latest sign that the end may be near for China’s leading group buying site as it rapidly runs out of cash. I last wrote about LaShou back in late April, when it looked like the company may only have months left to live as it bled cash after a failed New York IPO and the departure of a number of top executives, including its regional managers in Shanghai and Beijing and a vice president. (previous post) Two months later, media are now reporting that company founder Wu Bo is leaving his post as company CEO, even as he retains his position as LaShou’s chairman. (Chinese article)
The report says LaShou declined to directly confirm Wu’s departure from the CEO spot, and would only confirm that he remains as chairman in charge of the company’s strategic direction. The report hints that Wu was forced out by the company’s investors, and that the CEO position remains unfilled for now. If the report is true, which seems like a strong possibility, then it appears that LaShou’s investors, who pumped a hefty $111 million into the company just over a year ago (previous post), have finally lost their patience with the man who promised to build his company into the Chinese equivalent of US pioneer Groupon (Nasdaq: GRPN).
In all fairness, Wu really isn’t completely to blame for LaShou’s woes, as the entire group buying sector in China is currently undergoing a painful consolidation after an explosive build-up in 2011 that saw big names like Tencent (HKEx: 700) and Groupon itself enter the market, along with a big number of start-ups like LaShou. One could even say that if the sector had found a good business model, there’s a strong chance that LaShou, leveraging its early arrival to the space and market-leading position, could have quickly emerged as a consolidator by buying up other struggling rivals at big discounts.
Instead, LaShou itself now looks like it will soon become a victim of the clean-up, remaining independent for the next 1 to 2 months at the most before the end comes. So, what exactly will the end look like? The exit of Wu from the CEO’s spot looks like a desperate attempt by the LaShou’s investors to find a buyer for the company, and I expect that talks are probably happening right now with 2 or 3 potential acquirers with strong cash positions, such as the profitable Dianping or money-losing Groupnet, the newly formed company created by combining 2 group buying units of cash-rich Internet giant Tencent. (previous post) The other possibility is that no one will want to buy LaShou due to its large size and weak cash position, meaning the company could soon be forced to simply close shop, leaving behind millions of dollars in debt and thousands of laid-off employees.
If I were a betting man, I would predict that the company stands a greater than 50 percent chance of being acquired, since its extensive networks and experience would be attractive assets for a buyer, which could likely purchase the company for a very low price, probably less than $50 million. But the company still also faces the real possibility that it will simply be forced to shut down, with the chances of such a closure at perhaps around 30 percent. Either way, I suspect we’ll see an end to this story by the end of September.
Bottom line: The departure of LaShou’s founder from the CEO spot is the latest sign that the end may be near for the firm, which will probably be acquired by a stronger player as soon as next month.
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