Bottom line: New data from 2 separate reports show the number of smaller venture deals is steadily declining in China, creating a cash crunch for startups as private sector investment slows sharply.
Venture investment deals slow in Q2
In a coincidence of timing, 2 separate consultants that track venture capital spending have just released second-quarter data that show very differing trends for China. China boosters will inevitably like the new figures from Venture Pulse, which showed that venture capital spending in China jumped 26 percent in the second quarter. Meantime, China bears will undoubtedly point to separate data from a Prequin Ltd report that show venture funding in the country plummeted by more than half in the quarter to its lowest level in almost 3 years. Read Full Post…
Bottom line: The latest China trip by Apple’s CEO is designed to spotlight the company’s new mega-investment in Didi Chuxing and show its continued relevance for local app makers, as it seeks positive media coverage to halt a recent series of negative news.
Apple CEO looks for positive news on China trip
Less than 2 weeks after media first reported plans for a new China trip by Apple’s (Nasdaq: AAPL) CEO, Tim Cook has appeared in Beijing for the eighth visit to his company’s second largest market. This particular visit comes at a sensitive time for Apple, which has experienced a number of China setbacks recently, led by a sharp drop in sales during the first 3 months of the year.
Against that backdrop, I previously said that Cook’s new trip looked partly aimed at damage control, though we should also note that he was already a frequent visitor to the country. In keeping with the past, Cook was relatively low key this time and didn’t even announce his arrival in China until he was spotted at a meeting with some of the company’s local app development partners in Beijing. (Chinese article) Read Full Post…
The following press releases and news reports about China companies were carried on May 10. To view a full article or story, click on the link next to the headline.
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China Going-Private Targets Extend Selloff on Deal Scrutiny (English article)
Regulator Tells Baidu (Nasdaq: BIDU) to Change Ad Auctioning System (English article)
JD.com (Nasdaq: JD) Announces First Quarter 2016 Results (GlobeNewswire)
Facebook (Nasdaq: FB) Beverages Won’t Be a Thing in China After Rare Trademark Win (English article)
Meituan Cuts Off E-Commerce to Focus on O2O Businesses (Chinese article)
More than a month after Shanghai launched its campaign to tame our unruly traffic, I want to use this space to call for a similar campaign that is badly needed to clean up our city’s increasingly chaotic sidewalks. Anyone who lives here will know I’m talking about the legions of delivery bikes and scooters that have exploded onto Shanghai’s sidewalks over the last few years, creating a nightmare for those of us who actually use sidewalks for walking.
This particular tale began 5 or 6 years ago with the rapid rise of e-commerce, which spawned a flood of courier services delivering everything from major items like computers and furniture to tiny parcels like USB thumb drives. But the problem has become much worse over the last year with a newer explosion of take-out dining services, which have unleashed thousands more bikes and scooters onto our sidewalks. Read Full Post…
Bottom line: Beijing and local governments should move more aggressively to regulate O2O takeout dining services, and encourage consolidation around 2-3 players with the scale and resources to ensure the sector’s healthy development.
Ele.me gets big new funding from Alibaba, Ant
New signs of overheating emerged in China’s online takeout dining realm last week, as one of the nation’s top players and a smaller rival landed major new funds to fuel their money-losing operations. The pair of deals saw China’s two leading e-commerce companies, Alibaba (NYSE: BABA) and JD.com, collectively pump nearly $1.5 billion into new investments in the space, even as other major players like Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) are also beefing up their services.
The flood of new money has produced a rapidly escalating round of price wars, offering deals for consumers but creating chaos in the market and on the streets of major cities like Beijing and Shanghai. This kind of boom is quite typical for China’s emerging high-tech sectors, but in this case also poses unique challenges due to practical dangers such as threats to food and road safety. Read Full Post…
Bottom line: China’s airlines are likely to permanently ban independent travel agents from selling on Qunar and other third-party platform operators, dealing a serious blow to their air ticketing businesses.
Dead end near for Qunar air tickets?
The bad news just keeps coming for travel agent Qunar (Nasdaq: QUNR), with word that its online sales platform could soon be banned for sale of tickets from China Southern (HKEx: 1055; Shanghai: 600029), the nation’s largest airline. Media are reporting that China Southern is preparing to roll out a wide-ranging new policy to govern the agents who sell its tickets. A key part of that will ban agents from selling China Southern’s tickets over third-party platforms like the one that Qunar operates.
This particular bad news is significant but also incremental, since China’s major airlines have been slowly freezing out Qunar this year due to complaints from people who buy their tickets over the company’s online platform. That platform allows independent travel agents to sell tickets on Qunar’s site, with a growing number of agents using deceptive or even fraudulent practices to make sales. Read Full Post…
This week’s Street View takes us to the offices of one Shanghai’s hottest Internet companies, though take-out delivery superstar Ele.me probably would have preferred to avoid the spotlight on this year’s global Consumer Rights Day that fell on March 15. But anyone who missed that story, which saw Ele.me blasted for using unlicensed restaurants, needn’t worry about accidentally missing this particular day designed to draw attention to a specific cause.
That’s because I’ve recently become aware of Shanghai’s fondness for commemorating many of the growing number of global days designed to draw attention to just about any cause imaginable. While there’s certainly no harm in using such events to raising awareness of things like environmental protection, it does seem like Shanghai’s growing obsession with these promotional days is getting slightly out of hand and may need to become a little more selective. Read Full Post…
Bottom line: Cautionary comments from Caixin and Ele.me about investments from Alibaba and its affiliates reflect a growing wariness from companies at accepting money and yielding control to the e-commerce giant.
Alibaba’s Ant invests in Caixin
The voracious Alibaba (NYSE: BABA) is in 2 new M&A headlines as we head into the end of the week, led by word that its Ant Financial affiliate was an investor in a new fund-raising round in Caixin, one of China’s best respected financial media. A second headline has take-out dining pioneer Ele.me denying reports that Alibaba, which is already one of its biggest shareholders, will devour the company completely. Instead, Ele.me is saying it will continue working closely with Alibaba’s own take-out delivery service called Koubei.
Both headlines reflect a growing resistance by founders of these companies to outright ownership by Alibaba-related companies. In the first case, Caixin was quick to issue a statement saying Ant was only one of several new investors in its new funding round. Ele.me’s case is similar, quashing earlier speculation that it would ultimately get swallowed up by its cash-rich backer. Read Full Post…
Bottom line: Meituan-Dianping’s IPO is likely to raise more than $2 billion and should get a strong reception when it comes, most likely by mid-year in New York, while ZTO Express’ $1-$2 billion IPO will get a cooler reception due to its steep losses.
Meituan-Dianping eyes IPO
After a quiet start to the year, the market for offshore Chinese IPOs is slowing coming to life with word of 2 listing plans that should both top the $1 billion mark. One would see leading group buying site Meituan-Dianping list, most likely in New York or possibly Hong Kong, in a deal that would probably raise at least $2 billion. The second is also Internet-related, and would see parcel delivery giant ZTO Express also raise up to $2 billion in a New York IPO.
Perhaps not surprisingly, both of these companies are losing money despite their position as industry leaders. That’s because competition has been cut-throat in both spaces, especially in the parcel delivery business that supports China’s booming e-commerce sector. Meituan and Dianping were also locked in heated competition before they merged late last year to face the current company, which still faces stiff competition from 2 of China’s leading Internet companies, Baidu(Nasdaq: BIDU) and Alibaba (NYSE: BABA). Read Full Post…
Bottom line: Alibaba is likely to enter talks to buy a strategic stake in Groupon or even make a bid for the entire company, following its disclosure that it has purchased 5.6 percent of the US company in the open market.
Alibaba buys Groupon stake
What exactly was leading Chinese e-commerce company Alibaba (NYSE: BABA) thinking when it quietly purchased 5.6 percent of Groupon (Nasdaq: GRPN) shares on the open market without informing the faded US group buying pioneer? That’s the question that will be making the rounds this week, following the surprise disclosure of Alibaba’s purchase that Groupon only learned about through a regulatory filing.
Of course the most intriguing possibility is that Alibaba could be weighing a bid to acquire Groupon completely, which wouldn’t be that preposterous for reasons I’ll explain shortly. Other media are putting a less aggressive spin on the move, saying that Alibaba simply hopes to learn from Groupon’s group buying skills that first propelled it to fame about 6 years ago. Read Full Post…
Bottom line: Alibaba’s shares are likely to remain under pressure through the rest of this year as it enters a new phase of slower growth and its stock faces short-term pressure from short sellers.
Investors unimpressed by Alibaba results
E-commerce leader Alibaba(NYSE: BABA) was hoping for praise and kudos when it posted quarterly results that beat market expectations, but instead is receiving a cold shoulder from Wall Street bears who are betting against the company. That’s the bottom line, as investors dumped Alibaba shares after the company reported quarterly revenue that was slightly ahead of expectations.
At the same time, other media reports say that Alibaba is on the cusp of a deal to sell its stake in leading Chinese group buying site Meituan-Dianping for around $900 million. This particular sale was reported previously, and thus isn’t huge news to investors. Still, many are probably disappointed that Alibaba is yielding this important piece of the China online-to-offline (O2O) services market to rival Tencent (HKEx: 700), which will now become Meituan-Dianping’s undisputed strategic partner. Read Full Post…
