Bottom line: A US prosecutor’s decision not to file rape charges against JD.com’s founder may bring short-term relief to the stock, but the case still shows the importance of understanding the unusual role Chinese founders play at their companies.
Scales of justice tip in JD.com’s favor
On this day after Christmas I thought I’d play a little catch-up by weighing in on the controversial decision that saw a Minnesota prosecutor decline to press rape charges against JD.com’s(Nasdaq: JD) founder and CEO Richard Liu. Following the big announcement at the end of last week, there’s been a minor follow-up as another former China e-commerce executive came to Liu’s defense, only to get blasted himself and end up issuing an apology.
There are several big lessons in this tale, led by the fact that Chinese standards for what constitutes acceptable behavior are not always in sync with those in the West. That’s an important lesson for Western investors who may buy into these companies thinking that, for example, a JD.com is the same thing as Amazon.com (Nasdaq: AMZN). The JD case shows that clearly there are major differences in terms of behavior by both the companies and their founders. Read Full Post…
Bottom line: The collapse of Dangdang’s $1.2 billion sale of itself to HNA shows the deal was most likely fueled by backdoor connections with no grounding in financial reality, and the company will probably be sold ultimately at a much lower price.
Dangdang comes out a lemon after HNA sale collapses
It’s Friday and I’m quite looking forward to the weekend, so I thought I’d indulge myself with a more gossipy post on the latest troubles of e-commerce has-been Dangdang. Anyone looking for good stock tips with this one will probably be somewhat disappointed, since Dangdang was one of a large group of Chinese firms to privatize from New York over the last few years in pursuit of higher valuations by re-listing at home.
A number of companies from that re-listing wave have already re-listed here in China, often with results that bore out the thesis that such a process was well worth the effort. Among those are names like Focus Media (Shenzhen: 002027) and Homeinns (Shanghai: 600258), which are now worth considerably more as China-traded companies than they ever were in New York. Another notable success is WuXi AppTec (Shanghai: 603259), a drug maker that was part of the larger WuXi PharmaTech that de-listed from New York in 2015. Read Full Post…
Bottom line: Meitu’s new disclosure of rapid growth in its internet services revenue looks encouraging, as it takes advantage of its early arrival status in a beauty products sector with big profit potential.
Meitu makes over image with internet revenue growth
A month after its lackluster IPO, beauty app operator Meitu (HKEx: 1357) is trying to shore up its sagging stock by releasing some financial data that proves it’s more than just a place for people to doll up selfies to share with friends. The particular data shows that Meitu actually earned some relatively sizable Internet revenue from online sales and advertising in the month of December, proving it can make money more directly linked to its core beauty app.
Before that, the lion’s share of the company’s revenue had come from sales of smartphones optimized for its app. Critics had argued such a business model wasn’t really sustainable, since many such purchases are one-time items that might not be repeated. By comparison, online advertising and sales of products linked to its core app seem more sustainable. Read Full Post…
The following press releases and news reports about China companies were carried on September 21. To view a full article or story, click on the link next to the headline.
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Postal Savings Bank of China Set to Price Hong Kong IPO Near Low End (English article)
New Disclosure Shows Tencent (HKEx: 700) Owns 45 Pct of Search Engine Sogou (Chinese article)
Bottom line: Qihoo’s reorganization is part of its hurried bid to re-list in China to pay off backers of its privatization, while shareholders of Trina and Dangdang are likely to approve final management-led buyout offers for the 2 companies.
Qihoo rejigs in hopes of re-listing
The homeward migration of US-listed Chinese companies is in a trio of new headlines, showing that financiers are still willing to back de-listings for stronger companies. The largest of the headlines has security software specialist Qihoo 360 undergoing a major overhaul as it seeks to re-list in China, following its record-breaking privatization from New York last month. Meantime, solar panel maker Trina (NYSE: TSL) and e-commerce site Dangdang (NYSE: DANG) have also announced major advances in their own plans to privatize. Read Full Post…
Bottom line: A spike in short-selling of China e-commerce stocks led by JD.com and Alibaba is cyclical and unrelated to their longer-term prospects, and a bounce-back is likely by year-end.
Short sellers gobble up JD stock
It seems even a new partnership with global retailing giant Walmart (NYSE: WMT) can’t help sagging shares of JD.com (Nasdaq: JD), China’s second largest e-commerce company, which has recently become flavor of the day among short sellers. That’s the word coming from a new Bloomberg report, which says short seller interest in JD’s stock reached a record high in mid June, after already doubling over the previous month. This story isn’t really new, as I wrote about a similar short-selling boom for shares of JD rival Alibaba (NYSE: BABA) a couple of weeks ago also. Read Full Post…
Bottom line: JD.com will quietly close Yihaodian after acquiring the online store from Walmart, and Amazon is the most likely next large player to withdraw from China’s e-commerce market in the next few years.
JD.com takes over Walmart’s Yihaodian
In what can only be described as a major surrender, Walmart (NYSE: WMT) is selling its struggling online flagship Yihaodian in exchange for about $1.5 billion worth of shares in JD.com (Nasdaq: JD), China’s second largest e-commerce player. The development isn’t a complete surprise, since Yihaodian has struggled to compete with JD and industry titan Alibaba (NYSE: BABA) since Walmart purchased the company 4 years ago. The withdrawal also shines a spotlight on the very real fact that foreign companies often can’t compete on China’s Internet, and raises the question of whether Amazon (Nasdaq: AMZN) might be the next to abandon the complex market. Read Full Post…
Bottom line: Dangdang’s latest buyout offer is likely to meet with minority shareholder resistance due to its sharp downward revision, while Momo is also likely to lower its earlier buyout price if and when it announces a final offer.
Dangdang gets lowered buyout offer
After pausing briefly last week, the train of publicly-traded Chinese firms leaving New York has resumed with the receipt of a new offer for faded e-commerce company Dangdang (NYSE: DANG). In this case it’s significant that Dangdang has announced a revised buyout offer from its founders, since that means the deal most likely has the necessary funding and is likely to move ahead. But it’s also significant that this revised offer is sharply lower than 2 earlier offers for the company, one from its founders and one from a rival bidder.
Next there’s social networking app operator Momo (Nasdaq: MOMO), which has remained mum on its own pending buyout bid in its latest quarterly results. That doesn’t mean the bid is necessarily on hold, especially after word emerged last month that e-commerce giant Alibaba (NYSE: BABA) was joining the buyout group. But Momo’s shares now trade well below their earlier buyout price, and I suspect that if and when it finally announces a concrete offer the price will also be revised downward from the earlier bid. Read Full Post…
Bottom line: Many privatization bids by Chinese firms hoping to re-list in China could collapse if the CSRC cracks down on backdoor listings, though de-listing plans backed by big private equity names could still succeed.
Privatizing shares tumble on CSRC rumors
Rumors that they might get a chilly reception from China’s securities regulator has sparked a major sell-off for shares of US-traded companies trying to privatize and re-list at home in search of higher valuations. The dive is one of the largest I’ve seen for any single group in quite a while, and could present a great buying opportunity for anyone who believes these companies can still successfully privatize and re-list in China.
But in this case I might be more inclined to agree with the pessimists, since China’s securities regulator is quite conservative, even though I’ve said it should continue to allow these re-listings. (previous post) In this case the China Securities Regulatory Commission (CSRC) may also be acting under direct orders from Beijing, which is already worried about another major sell-off on domestic stock exchanges like one early this year. Read Full Post…
Bottom line: A new rival bid for Dangdang and the long closing period for Jiayuan’s privatization reflect growing shareholder resistance to low prices being offered for Chinese companies trying to de-list from New York.
Dangdang gets rival buyout bid
A couple of new headlines reflect the growing chorus of complaints about low bid prices being made for Chinese companies privatizing from New York, led by a surprise new rival offer for former e-commerce leader Dangdang (NYSE: DANG). In the other headline, online dating site Jiayuan (Nasdaq: DATE) is finally moving closer to the New York exit door, after a year-long process that saw the company’s original buyout offer meet with stiff resistance from shareholders unhappy about the price.
The volume of protest noise against some of the most recent offers has certainly been growing, as company shareholders try to get more money for their stock in the wave of buyout offers. The most recent twist saw shareholders cry foul over a management-led buyout bid for online cosmetics seller Jumei (NYSE: JMEI) last month. (previous post) A slightly different but related development saw the founder of medical clinic operator iKang (Nasdaq: KANG) cry foul after his own bid for his company got trumped by a higher offer from an independent bidder. (previous post) Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 10. To view a full article or story, click on the link next to the headline.
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iMeigu Submits Proposal to Acquire Dangdang (NYSE: DANG) (PRNewswire)
Huawei Rolls Out Huawei Pay in Bid to Shake Up Mobile Payments Market (Chinese article)
China Smartphone Supply Chain Facing Pressure From Rising Costs – IDC (Chinese article)
Alibaba (NYSE: BABA) Set to Close $4 Bln Bank Loan – Reports (Chinese article)
Ourpalm (Shenzhen: 300315) to Buy 19 Pct of Korea’s Webzen for 1.1 Bln Yuan (English article)
