Bottom line: Meituan’s opening of its delivery unit to more customers looks smart but will require execution to succeed, while shares of money-losing Starbucks challenger Luckin will move steadily downward in the months after its super-sized IPO.
Meituan opens up delivery service
A couple of money-losers are in the headlines these last few days, casting a spotlight on how profits continue to evade many of China’s hottest tech companies and what they’re doing to try to change that. This kind of loss-making isn’t all that uncommon for such startups. But in at least one of the cases we’re looking at today, the company Meituan Dianping (HKEx: 3690), is already a decade old or more, depending on which piece of it you look at. That hardly qualifies as a startup by most people’s definition, even though the company is still losing massive money.
The news involving Meituan has it opening up one of its biggest money gobblers, which specializes in restaurant takeout delivery, to other third-party customers besides just restaurants. The other news involves Luckin, an app-only coffee chain that wants to challenge Starbucks (Nasdaq: SBUX). That news had the company significantly supersizing its IPO plan to $500 million despite the fact that it’s just two years old. Read Full Post…
Bottom line: Nio stock is likely to give back most of its huge second day gains over the next couple of weeks, while Meituan-Dianping could debut strongly but will likely stagnate for its first two years as a public company.
Meituan, Nio display surprising strength
It seems that perhaps I was a bit premature earlier this week when I wrote the latest listing by electric vehicle (EV) maker Nio showed investors had lost appetite for money-losing Chinese tech firms. Nio’s stock has actually done quite well in its first two trading days, after a tepid pre-debut reception. And now we’re getting word that money-losing online-to-offline (O2O) services giant Meituan-Dianping has also priced its own mega-offering in Hong Kong at the top of its range.
Such a sudden shift in sentiment seems hard to explain, and I do suspect there may be at least a little manipulation going on behind the scenes. Still, perhaps investors are feeling just a tad more upbeat about Chinese tech these last few days in light of new signs that the US-China trade war may soon ease with new talks scheduled to try to hammer out a deal. Read Full Post…
Bottom line: Meituan-Dianping’s IPO is likely to meet with lukewarm reception due to its big losses in several key areas, but could become more attractive over the medium term as it emerges as industry leader in one or two key areas.
Restaurant ratings leader takes IPO orders
As the rest of China continues to fixate on the sex scandal surrounding e-commerce giant JD.com’s (Nasdaq: JD) CEO, I thought I would end the week on a less controversial subject with a look at another blockbuster IPO by online-to-offline services giant Meituan-Dianping. The company has officially filed to make a listing in Hong Kong, and could be one of a growing number of Chinese Internet firms to choose the former British colony over the U.S. following a rule change earlier this year.
That change allowed companies to list in Hong Kong using a dual-class share structure that gives disproportionate voting power to company managers over ordinary shareholders. Previous prohibition of such a structure was the key element that led e-commerce giant Alibaba(NYSE: BABA) to make its own record-breaking IPO in New York instead of Hong Kong in 2014, and no doubt Hong Kong is still smarting over that loss. Read Full Post…
Bottom line: A new IPO by e-commerce company Pingduoduo could do reasonably well due to its rapid growth and unusual business model, but could suffer from a “flavor of the day” element over the longer term.
Pinduoduo puts new spin on group buying
After years of basically having just two choices to invest in China’s e-commerce market, investors will soon have another new and interesting option with the upcoming listing of a company called Pinduoduo. I’ll admit that I was unfamiliar with Pinduoduo before reading about this upcoming listing. But that said, the numbers do point to a potential high-flyer in the making, including a business model that combines elements of Groupon (Nasdaq: GRPN) and Facebook (Nasdaq: FB) to let people recruit their friends to get good deals on merchandise.
The company is also noteworthy for its ties to social networking giant Tencent(HKEx: 700), whose wildly popular WeChat platform is apparently the main venue where friends can get together to get their deals. This particular deal comes as China’s own homegrown Groupon, Meituan-Dianping, prepares for its own Hong Kong listing in a deal expected to raise up to $6 billion, amid a broader bumper IPO season for China new economy offerings. Read Full Post…
Bottom line: Alibaba’s purchase of Ele.me and Tencent-backed Meituan’s purchase of Mobike underscore the growing rivalry between Alibaba and Tencent, as each uses its deep pockets to try and dominate money-losing emerging sectors.
Alibaba swallows Ele.me
Trade wars are making all the big headlines these days in US-China news, forcing a couple of mega-mergers that would normally be front-page news into the back pages. Each of the latest deals is quite significant for China’s Internet, as both quietly underscore the increasingly intense rivalry between titans Alibaba (NYSE: BABA) and Tencent(HKEx: 700).
The larger of the deals has Alibaba forking out more than $5 billion to buy the remaining stake of Ele.me it doesn’t already own, adding important fire power to the leading takeout dining service whose chief rival is Meituan-Dianping. In a separate but also quite large deal, Meituan, which counts Tencent as one of its largest backers, has acquired leading shared bike operator Mobike in a deal that values the latter at about $2.7 billion. Read Full Post…
Bottom line: Didi’s foray into takeout delivery and Meituan’s into private car services look like moves of desperation to make the companies more attractive as they get pressured to make IPOs by the end of next year.
Meituan eyes car services
Two of China’s biggest unlisted internet companies are in the headlines as the week winds down, each taking a shot at the other’s turf. One headline has the Uber-like Didi Chuxing hiring in preparation to launch a takeout dining service like the one operated by Meituan-Dianping. The other has Meituan-Dianping preparing to roll out its own private car services in seven Chinese cities, taking a direct shot at Didi.
The timing of these two news bits is probably coincidental, since I doubt they share information on their strategic planning. What’s more, the Meituan move into car services is just an extension of previous earlier news. From a bigger perspective, both items smack just slightly of desperation as these two companies look for growth in the face of stagnating core businesses. Read Full Post…
Bottom line: Meituan’s move into shared car services is likely to reignite a price war with incumbent Didi, and could be aimed at generating excitement ahead of a mega-IPO later this year.
Meituan entering shared cars
Just days after reports emerged that car-sharing giant Didi Chuxing would pedal into the shared bike market, new reports are saying that group buying giant Meituan-Dianping is driving into Didi’s own shared car services space. These two stories underscore a theme that comes up time and again in the China tech world, whereby cash-rich companies often pile into hot and trendy sectors where they have little or no experience.
In this case the Meituan move has interesting implications because it could restart a fierce price war that was finally resolved last year when Didi merged with UberChina to take on its current form. Didi has pretty much owned the market since then, though it still faces some competition at various local levels. Now all that could change with the entry of Meituan, which should be flush with cash to launch yet a new round of price wars. Read Full Post…
Bottom line: Baidu could announce a sale of its takeout dining unit to Ele.me by the end of the month, in a smart exit that will leave the industry with two major players and could result in a major write-off for Baidu.
Baidu takeout gets taken out
In a move that’s been a long time coming, media are reporting that search giant Baidu (Nasdaq: BIDU) is on the cusp of a deal to unload its aging takeout delivery service to rival Ele.me, in a deal that would essentially whittle the ultra competitive space down to just two players. This particular development follows quite a typical pattern for Baidu, whose founder Robin Li has discovered he can quickly gain market share in new areas by throwing lots of money at them, sometimes through organic build-ups and sometimes through acquisitions.
Unfortunately, Li also has a strong track record of building up money-burning black holes that become problematic because they consume so much cash that they can’t be easily shut down. He has closed at least one such venture in the past, an e-commerce venture with Japan’s Rakuten. In another instance he sold off his Qunar online travel service to industry leader Ctrip (Nasdaq: CTRP). Read Full Post…
Bottom line: Alibaba could take control of Ele.me after the latter’s latest fund-raising, and then make a bid for Baidu’s take-out dining service, leaving just two major players in the sector as it nears a more sustainable state.
Alibaba set to swallow Ele.me?
The take-out dining wars have taken another interesting twist, with word that one of the oldest players, Ele.me, is on the cusp of raising a fresh $1 billion in new funds. What’s interesting about this latest fund raising is that it’s being led by Alibaba (NYSE: BABA), which is also trying to carve out a niche in the market through its own Koubei take-out delivery service. But even more intriguing is the possibility that this new funding could be aimed at giving Ele.me the firepower it needs to buy out Baidu’s (Nasdaq: BIDU) take-out delivery service, which is reportedly being shopped by the country’s leading search engine.
There are many threads to this story, but the bottom line is an end game is slowly coming into sight for China’s take-out delivery business, following the typical boom period we often see for this kind of emerging sector. The current field of take-out dining services is dominated by three names, Alibaba-backed Ele.me, Tencent-backed (HKEx: 700) Meituan-Dianping and Baidu take-out. Read Full Post…
Bottom line: New anti-corruption moves at JD.com and Meituan-Dianping show the cleanup campaign is moving down to the grass-roots level, in a positive development that should help the companies as many seek to go abroad.
Meituan, JD.com in new anti-corruption snares
Anyone unfamiliar with China might find it peculiar and even worrisome that near simultaneous announcements appear to show problematic internal corruption at two of the nation’s top Internet companies, e-commerce giant JD.com (Nasdaq: JD) and leading group buying site Meituan-Dianping. While the timing does seem somewhat coincidental, this kind of thing is becoming quite common these days, as China’s companies fall in behind the central government’s nearly 4-year-old anti-corruption campaign.
From an observer’s perspective, I have to say this kind of campaign is sorely needed in China’s corporate sector, both for state-run and private companies. The kinds of internal corruption detailed in these latest reports are far too common in companies, where employees regularly use their position to do things like extort money from and cheat customers, and even rip off their own companies. Read Full Post…
Bottom line: Alibaba’s Koubei is unlikely to gain major traction despite its $1.1 billion in new funding, due to its late arrival to a crowded O2O take-out dining space already dominated by Baidu, Ele.me and Meituan-Dianping.
Koubei raises $1.1 billion
The longer I stay in China, the more the latest stories coming from the Internet sector look like I’ve seen them before. That’s certainly the case with Koubei, the Alibaba (NYSE: BABA) online-to-offline (O2O) take-out dining delivery service, which is close to landing a fresh $1.1 billion in new funding. In this case, Alibaba’s extremely late arrival to the space looks a lot like its vain attempt to play catch-up to Tencent’s (HKEx: 700) WeChat with a service called Laiwang back in 2013. Read Full Post…
