Bottom line: Focus Media and Giant Interactive will become the first 2 companies to re-list in China after privatizing from New York, but will still struggle for attention and could end up with valuations roughly equal to what they had previously.
Giant completes backdoor listing, Focus close
China’s first 2 companies to attempt re-listings at home after privatizing from New York are both in the headlines today, led by word that Giant Interactive has completed its backdoor listing using a company called New Century Cruises (Shenzhen: 002558). At the same time, separate reports are saying that outdoor advertising specialist Focus Media is on the cusp of completing its own backdoor listing after receiving official approval from the securities regulator to execute its plan using another Shenzhen-listed company called Hedy Holding (Shenzhen: 002027).
The completion of both deals right around the same time seems like more than coincidence, and probably coincides with the regulator’s announcement last week that it will resume new IPOs after a 5 month hiatus due to volatility on China’s stock markets. It’s also quite revealing that both Giant and Focus are big Shanghai-based companies, meaning they probably have more financial sophistication and other resources than most other companies seeking to make a similar homeward migration. Read Full Post…
Bottom line: Tencent’s recent cash-raising frenzy probably signals a major equity investment coming in the next few months, with a merged Meituan-Dianping or Activision as the most likely targets.
Tencent raises more cash via syndicated loan
Tencent(HKEx: 700) may be the lowest-key of China’s big 3 Internet companies, but the company has been far louder on the money- raising scene by borrowing billions of dollars in cash lately. The social networking (SNS) giant has raised billions through a series of bond issues over the last year, and now looks set to raise another $1.5 billion through a syndicated loan that it’s reportedly negotiating with several major western lenders.
All this raises the question of what exactly Tencent is targeting with all the new cash. The company has been the least acquisitive of China’s big 3 Internet companies, which include itself, Alibaba(NYSE: BABA) and Baidu(Nasdaq: BIDU), amid a major consolidation in China’s Internet over the last 2 years. Read Full Post…
Bottom line: CICC and Jiuxian are benefiting from a growing number of domestic listing options for private Chinese companies, but both will still need to show they can be profitable industry leaders for investors to take them seriously.
Jiuxian finally debuts on China OTC
A couple of new IPOs are highlighting the growing allure of China’s increasingly diverse stock markets for domestic companies that used to flock to New York. Leading the headlines is a very respectable performance in the long-awaited Hong Kong trading debut for CICC (HKEx: 3908), China’s oldest investment bank. The strong debut came even after CICC had to scale back the offering due to weak demand, and market watchers are attributing the performance to separate news that China will resume domestic IPOs by year-end after a pause of several months.
In the other headline, online wine seller Jiuxian has become the latest Chinese Internet firm to list on the country’s 2-year-old over the counter (OTC) market. The loss-making Jiuxian had initially aimed to list in New York, but abandoned that plan for a simpler offering at home. It joined other money-losing startups making similar listings over the last week, including online classified ad site Baixing and Alibaba-backed (NYSE: BABA) soccer club Evergrande Taobao. (previous post) Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 6. To view a full article or story, click on the link next to the headline.
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Tsinghua Unigroup Affiliate to Raise $13 Bln to Bankroll Chip Plants (English article)
China’s Solar Power Eyes $300 Mln US IPO to Crowdfund Green Power (English article)
SAIC (Shanghai: 600104) to Raise 15 Bln Yuan, Quicken New Energy Car Efforts (Chinese article)
MIIT Official Responds to Telecoms Consolidation Talk, Says No Overhaul Begun Yet (Chinese article)
Commerce Minister Zhang Mao Visits Alibaba (NYSE: BABA), Encourages Innovation (Chinese article)
Bottom line: Tencent’s latest plan to invest $1 billion in Meituan-Dianping looks like an awkward bid for control of the newly merged company, which could attract a rival bid from Alibaba.
Tencent as awkward suitor
Social networking giant Tencent(HKEx: 700) has never been very good at public relations, unlike slicker Internet rivals Alibaba(NYSE: BABA) and Baidu (Nasdaq: BIDU), whose founders are much better at wooing the media and investors. That refrain is ringing true once again with the latest mega-investment headlines, which appear to show Tencent making an awkward bid for the newly formed group buying giant created by the merger between former rivals Dianping and Meituan.
In fact, Tencent isn’t really bidding for the new company outright, but appears to be voicing its future intent by offering the merged company $1 billion in new funding. Such a funding would boost Tencent’s current equity in the merged company, in which it already holds a stake following its purchase of 20 percent of Dianping last year for $400 million. Such a bid would seem like a direct challenge to Alibaba, which also holds a relatively large stake in the newly merged company through its participation in a $300 million funding round for Meituan last year. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 30. To view a full article or story, click on the link next to the headline.
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Bottom line: LeTV’s latest hired car services investment and high-profile poaching of top talent from a rival look similar to the recent rapid rise and sputtering of Xiaomi, and the company could follow a similar trajectory by this time next year.
LeTV steals top talent from Youku Tudou
After watching the meteoric rise of online video sensation LeTV (Shenzhen: 300104) over the past year, I’m quickly tiring of this company and its hyperactive diversification strategy. The latest move in that drive is taking LeTV onto the road, with word the company is investing a hefty $700 million for a controlling stake of struggling private car services firm Yidao Yongche.
At the same time, other media are reporting that LeTV has just stolen a top executive from chief rival Youku Tudou (NYSE: YOKU), which announced last week it has received a buyout offer from e-commerce giant Alibaba (NYSE: BABA). Anyone feeling a sense of deja vu from these latest 2 LeTV headlines, and from LeTV’s meteoric rise in general, would be correct. Read Full Post…
Bottom line: LeTV’s fledgling e-commerce business could rise quickly but may also experience growing pains that bring negative publicity, as media start to tire of the company’s constant hype and its fortunes start to stagnate.
LeTV jumps into e-commerce
Online video sensation LeTV(Shenzhen: 300104) has never been one to do anything quietly, and that’s true once more with its sudden jump into the hotly contested e-commerce space. In its usual high-profile fashion, LeTV has sent out emails to reporters detailing its huge success with a recent e-commerce promotion, and also its launch of a US e-commerce site.
But the media weren’t giving to much ink to LeTV’s hype, and instead focused on negative reports of logistical problems connected to its recent promotion on September 19. Such problems don’t come as a huge surprise for an e-commerce newcomer like LeTV, which is far better known for its online video service than Inernet shopping. Read Full Post…
Bottom line: Jiuxian’s decision to list in China and Dangdang’s continued effort to de-list from New York show that low-quality Chinese firms will have difficulty getting attention from US investors and are probably better listing in their home market.
Jiuxian wine cellar to list on China’s OTC
Two news items continue to show a growing distaste for New York by Chinese web firms, led by word that veteran online wine seller Jiuxian has just received approval for an IPO on China’s over-the-counter (OTC) board. The second items comes from veteran e-commerce site Dangdang (NYSE: DANG), whose outspoken CEO is quoted complaining about his company’s low valuation and saying his plans are moving forward to de-list from New York and re-list in China.
The most commonly heard theme to these stories is that Chinese firms can get better valuations in their home market than New York, because their names are more recognized in China. But another theme that gets far less attention is that many of these complaining companies are simply low-quality products whose only real attraction is their “made in China” label. Read Full Post…
Bottom line: A scandal involving inflated sales reporting by workers at SouFun could cause the company to miss 2015 revenue guidance, and reflects pressures that China Internet firms are facing due to a slowing home economy.
SouFun uncovers inflated sales by employees
Just when it was beginning to claw its way back to favor with investors, real estate services website SouFun (NYSE: SFUN) is being rocked by a scandal after an internal probe revealed that some employees were inflating their new orders. The latest reports say SouFun has verified it fired some workers after uncovering the issue, though there’s no word on the magnitude of the problem.
More broadly speaking, this kind of report highlights the stresses that SouFun and rivals like E-House (NYSE: EJ) are facing due to a sharp slowdown in China’s overheated real estate market. That slowdown has caused prices to stagnate and transaction volumes to also tumble as buyers and sellers wait to see how the market will trend. That’s critical for companies like SouFun, since they depend on transactions for a big part of their business. Read Full Post…
Bottom line: The bankruptcy of a major component supplier to ZTE and Huawei is the latest sign of stress in the overheated smartphone sector, and at least 1-2 small to mid-sized brands are likely to leave the market by mid-2016.
Smartphone price wars undermine parts maker Fosunny
Fresh new cracks are appearing in China’s smartphone making machinery, with reports that a major component supplier to Huawei and ZTE (HKEx: 763; Shenzhen: 000063) has gone bankrupt. At the same time, another report is citing bad weather for a supplier’s delivery delays that are causing Alibaba-backed (NYSE: BABA) smartphone maker Meizu to postpone the launch of a new high-end model.
The most worrisome of these 2 stories is the bankruptcy of Fosunny, a maker of metal casings used for smartphones. The company lists US wireless carrier AT&T (NYSE: T) and Europe’s Vodafone (London: VOD) among its customers on its website, but I suspect that both of those relationships come via third-parties like Huawei and ZTE that supply smartphones to those telcos. Read Full Post…
