Bottom line: Tuniu is likely to quickly resolve a revolt by some of its third-party travel agents, and a sell-off of its shares looks overdone, while Rakuten’s third foray into China could finally succeed thanks to its choice of a more suitable partner.
Rakuten invests in Fanli
We’ll close out this week with a couple of stories buzzing through the Internet realm, led by a travel agent rebellion against online travel site Tuniu (Nasdaq: TOUR). Meantime, Japanese e-commerce giant Rakuten (Tokyo: 4755) is taking its third try at the China market through a new investment in an e-commerce company called Fanli.com, following failed previous forays with leading online travel agent Ctrip (Nasdaq: CTRP) and online search leader Baidu (Nasdaq: BIDU).
These 2 stories are mostly linked by the fact that both involve Internet companies. But in a twist that looks purely coincidental, Rakuten was also one of the earlier investors in Tuniu before the latter made its New York IPO early last year. It’s not clear if Rakuten still holds that stake in Tuniu, but if it does its shares just lost nearly 5 percent after a Thursday sell-off on reports of the merchant revolt. But Tuniu’s shares are about 75 percent above their IPO price, meaning its early investors are still doing quite well. Read Full Post…
Bottom line: Government officials are being forced to deal carefully with newly minted Internet giants like Alibaba, which sometimes commit transgressions due to their youth but also provide huge contributions to China’s economy.
Alibaba a double-edge sword for govt
A trio of stories about Alibaba (NYSE: BABA) nicely summarize both the risks and benefits that China’s Internet juggernauts present for the government, which must walk a fine line between taming these newly minted giants while being careful not to kill such economic powerhouses. In just the space of a decade, Alibaba, alongside Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU), have grown rapidly from venture-funded start-ups to become some of the world’s most valuable companies.
That growth and status has brought not only big prestige to China, but also valuable tax dollars to local governments and high-tech jobs that Beijing wants to replace lower-tech manufacturing labor. But at the same time, such young companies are particularly vulnerable to missteps, which can create chaos in the marketplace and Beijing needs to be careful to control. Read Full Post…
Bottom line: 58.com’s new Ganji tie-up looks like a smart partnership that should create a clear industry leader with a strong strategic partner in Tencent, though the stock could be set for a short-term correction due to overvaulation.
58.com buys 42 pct of Ganji
China’s Internet has just gained a major new player through the combination of online classified sites 58.com (NYSE: WUBA) and Ganji, which together will have a market value approaching the $10 billion level. Few companies outside the “Big 3” of Baidu (Nasdaq: BIDU), Tencent (HKEx: 700) and Alibaba (NYSE: BABA) can boast such valuations, and this particular deal seems to mark the emergence of a new sector leader that could even become an acquirer on the global stage.
Of course it’s easy to talk about going global, but actually doing that has been far more problematic for China’s booming field of Internet players. Still, this latest deal appears to show that 58.com may have the savvy that some of its larger rivals lack to make the global push, perhaps using this Gangji deal as a template for more strategic acquisitions in developing markets similar to China. Read Full Post…
The following press releases and media reports about Chinese companies were carried on April 18-20. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
58.com (NYSE: WUBA) Acquires Strategic Stake In Ganji, Investment by Tencent (PRNewswire)
E-Commerce Trust Services Firm Baozun Files For $200 Mln US IPO (Chinese article)
Bond Interest Default Looms For Solar Products Maker Baoding Tianwei (Chinese article)
After 8 Years Of Failing, Baidu (Nasdaq: BIDU) Shuts Japan Search Engine (English article)
China Minsheng Investment Corp To Invest 15 Bln Yuan In 2 GW Solar Farm (Chinese article)
Bottom line: Shares of Sina and its Weibo unit could come under pressure this week and for the next few months, as the regulator pushes for a clean up of its core news sites amid a broader Internet clean-up campaign.
Regulator clamps down on Sina news sites
A year-old Internet clean-up by Beijing is coming full circle to where it first began, with word that regulators have criticized and warned online stalwart Sina (Nasdaq: SINA) for failing to adequately censor its core web portal business. China Internet followers may recall that this prolonged clean-up began almost exactly a year ago when Sina’s video license was suspended after pornographic content was discovered on its literature and photo-sharing sites. (previous post) That case wasn’t too alarming since video is quite peripheral to Sina’s business. By comparison, this latest case looks a bit more worrisome, since it involves the portal news business that accounts for a big portion of Sina’s core advertising revenue. Read Full Post…
Bottom line: The move by Yahoo’s former China R&D chief to a major local Internet firm reflects growing work opportunities at Chinese companies, and waning attraction of China as an R&D center for big multinationals.
Former Yahoo R&D exec joins JD.com
A new move by a leading R&D executive is spotlighting a pair of major trends in China’s high-tech space, led by rapidly falling expectations for the market by big multinationals. The actual move has seen the former head of Yahoo’s (Nasdaq: YHOO) China R&D center take a new job at JD.com (Nasdaq: JD), China’s second largest e-commerce company, just weeks after Yahoo closed one of its last remaining Chinese operations. That move also highlights the growing attractiveness of big domestic companies for top R&D executives, who used to eschew such homegrown firms. Read Full Post…
Bottom line: A round of April Fool’s Day pranks by China’s Internet companies marks a nice break from their usual cut-throat tactics, while the soaring valuation for a newly created taxi app leader looks more typical for the sector.
Internet firms get into April Fool’s spirit
It’s a relatively quiet news day as we head into April, so I thought I’d take a break from all the latest crackdowns and controversies by looking at some of the clever pranks played by China’s top Internet names on April Fool’s Day. At the same time, one company that’s in no fooling mood is a new taxi app giant that’s being formed with a merger of the 2 top players, and could soon receive an impressive $8.75 billion valuation after a new investment.
These 2 particular headlines don’t really have much in common, since one is largely playful and meant to be fun while the other involves the far more serious business of determining a company’s value. The April Fool’s stories are a nice break from the usual competition and wars of words that are standard fare on China’s Internet. By comparison, bidding up valuations to inflated levels like we’re now seeing with the pending merger of DidiDache and Kuaidi Dache has become standard fare on China’s Internet, as investors bet big on future growth in the market. Read Full Post…
Bottom line: China’s regulators should work closely with innovators like Alibaba and SMG to minimize the risk from their new financial products that bring small lenders and borrowers together.
Alibaba, SMG partner on film finance
E-commerce giant Alibaba (NYSE: BABA) made its latest advance in the financial realm last week, announcing a major tie-up with Shanghai’s leading broadcaster to promote film finance over its online platform based on the crowd-funding concept. The move extends Alibaba’s recent forays into both entertainment and finance, and could provide a major boost for smaller Chinese movie makers who often lack access to project funding.
But the reality is that movie making is a highly risky business for even the most experienced companies, and smaller productions are famous for losing money. That means many of the projects that get financed through the new Alibaba tie-up with Shanghai Media Group (SMG) may ultimately see investors lose some or all their money if and when poorly conceived projects fail to find an audience. Read Full Post…
Bottom line: Chinese Internet stocks are likely to see a soft landing after a correction period in the first half of the year, with leaders and high-growth second tier players likely to experience a rebound in the second half.
China Internet stocks headed for soft landing
A new scorecard is casting a worrisome spotlight on the bumper crop of Chinese Internet firms that listed last year, pointing out that more than half are now trading below their IPO prices. The sagging prices continue a trend that I pointed out in my IPO scorecard at the end of last year. That trend has seen shares of many New York-listed Internet firms come back to their offering levels or lower as investors pocketed profits from strong post-IPO rises. (previous post) But rather than label this a reason for worry, I would argue instead this broader wave represents a rationalization of the market that will ultimately see the best-performing names rewarded and the money losers languish. Read Full Post…
Bottom line: Yahoo’s closure of its Beijing R&D center marks its final withdrawal from China, in a shift mostly related to internal issues but also reflecting the difficulties foreign Internet firms face in the tightly controlled market.
Yahoo closes Beijing R&D center
Nearly 2 years after shuttering its Chinese email service, faded US search giant Yahoo (Nasdaq: YHOO) looks finally set to completely leave the China market, with word that it’s preparing to close up its sizable R&D shop in Beijing. I’m not intimately familiar with Yahoo’s current China assets, but it does appear that this move represents the shuttering of the company’s last major Chinese operation. The move also comes as Yahoo prepares to spin off its sizable stake in Chinese e-commerce giant Alibaba (NYSE: BABA) into a separate company, bringing an end to the company’s decade-long marriage with China. Read Full Post…
Bottom line: Alibaba’s combining of its mapping and web browser units under a single leader marks the start of a necessary rationalization of its many acquisitions over the last 2 years, which could produce some odd pairings.
Alibaba combines UCWeb, AutoNavi units
After nearly 2 years of making billions of dollars in strategic acquisitions, we’re finally seeing an attempt by e-commerce giant Alibaba (NYSE: BABA) to integrate and rationalize some of those purchases through new tie-ups and other pooling of assets. In this case the integration is coming in an executive move, which is seeing the founder of its AutoNavi online mapping division leave the company. His former position will be taken over by the founder and head of Alibaba’s UCWeb browser division, combining the 2 units under the leadership of a well-respected tech leader named Yu Yongfu. Read Full Post…
