Message to 360Buy: Make Up Your Mind! 京东商城IPO“暗战”

By newsdoug on March 29, 2012

Leading e-commerce site 360Buy is increasingly looking like a schizophrenic company in terms of its IPO plans, a troublesome development that may reflect a growing rift between its charismatic chief executive and some of its deep-pocketed investors who last year gave it a record $1 billion-plus in new capital. Founder Liu Qiangdong has been quite adamant that an IPO is off the table until next year at the earliest, as he works to build his company into one that would be truly attractive to investors by bringing in seasoned top-level managers and earning profits — 2 things it currently lacks. But then other reports keep popping up saying the company, which also goes by the name Jingdong Mall, is quickly moving towards an IPO to raise billions of dollars, including some high-profile reports last year to that effect. (previous post) Now, just days after the company’s latest denial of any imminent IPO, media are once again reporting that 360Buy is hiring investment banks to underwrite its offering, in the latest sign of dysfunction behind the scenes. (Chinese article) The latest reports seem to have some credibility, as they contain some financial figures that 360Buy reportedly gave to investment banks as it shops for underwriters, including its revenue and profit margins, as well as its net loss and estimates of when it will become profitable. Those results reportedly showed the company’s transaction volume reached $3.4 billion, falling well short of a previous target of $4.3 billion amid stiff competition in China’s overheated e-commerce sector. The reports contain some other figures, but what’s more interesting to me is the infighting that appears to be going on behind the scenes as reflected by the conflicting IPO messages. My interpretation is that Liu wants to take a cautious approach by waiting until his company either turns profitable or sees profits in close range before making the offering. That seems smart, considering that investors have been punishing shares of money-losing Internet companies that have made public offerings over the last 2 years. In the most recent of those, shares of discount online retailer Vipshop (NYSE: VIPS) plunged 15 percent last week when it became China’s first web firm to make an IPO in more than half a year amid weak market sentiment. (previous post) Its shares have fallen further since then, and are now 30 percent below their IPO price. While Liu wants to take the prudent approach, I suspect that investors who made the massive investment last year, including Russia’s Digital Sky Entertainment, are getting worried about the company’s future as China’s e-commerce market gears up for a major correction, and are pushing for an IPO much sooner to recoup some of their money. If this is the case, look for a tug-of-war to continue into the months ahead, potentially forcing 360Buy into a premature IPO that could meet with weak investor demand and a poor trading debut if it happens this year.

Bottom line: Conflicting signs from 360Buy indicate a growing difference of views between its top manager and major investors over the timing of an IPO.

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