LaShou Shifts Focus in IPO March 拉手网在上市准备中有意转变战略方向

By newsdoug on November 8, 2011

LaShou reaches for new direction amid cool investor reception Leading Chinese group buying site LaShou must surely be encouraged by Groupon’s successful $700 million IPO last week, but oddly enough, the company is sending strange signals into the market in the run-up to its own US public offering that it hopes to make soon. In what looks like a deliberate news leak by the company, LaShou insiders are saying the company may abandon its group buying business model in favor of a more reliable model that would see it operate a more conventional e-commerce online mall. (English article) If true, this kind of shift would probably be a good one for LaShou over the longer term, as the e-commerce mall model has worked well for others around the world, including domestic leader Taobao Mall. But the timing of this kind of news, again if it’s true, will hardly appeal to potential IPO investors in LaShou, who will now surely wonder what exactly they are investing in. LaShou made its first public filing last week for an IPO it hopes to make in New York to raise up to $100 million, launching a race to market with crosstown rival 55tuan, which has also said it wants to make a US IPO by the end of the year. (previous post) My interpretation of this apparent news leak by LaShou is that it is probably in response to a very cool early reception to its planned offering from investors. In its first public filing, the company said it lost about $60 million in the first half of the year, and rampant competition in the sector means the losses aren’t likely to moderate anytime soon. On top of all that, constant quality control issues in the sector have led to a flood of complaints by consumers, with the result that the government is taking an increasingly aggressive stance towards these unruly group buying companies which could further stymie their future development. I previously said that problems with both LaShou and 55tuan, combined with broader issues in China’s group buying sector, could mean that neither of these 2 companies may end up making an IPO by the end of this year, even though both urgently need new cash. This latest news leak about LaShou appears to confirm that investors are giving its offering a cool reception, and indeed it may have to withdraw its plan unless it can convince investors why they should buy into the company.

Bottom line: LaShou’s apparent news leak about a potential major shift in strategic direction reflects a cool reception to its planned New York IPO.

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