Bottom line: iQiyi’s issue of convertible notes to raise its latest $1.5 billion shows it continues to post big losses, and investors are increasingly skeptical that it can become profitable in the next 2 years.
iQiyi lures investors with convertible notes
It seems no one is quite ready to believe that China’s cash-burning online video sites are ready for the profit column just yet. That seems to be the message coming from Baidu-backed (Nasdaq: BIDU) iQiyi, one of the leading players, which has just raised a fresh $1.5 billion via a convertible note issue. That would indicate that investors are hoping they can convert their notes into iQiyi stock when they come due, but can also simply collect back their money with interest instead. Read Full Post…
Bottom line: Homestay specialist Tujia could make a play to merge with the China operations of Airbnb, following its major new tie-up with leading online travel sites Ctrip and Qunar.
Ctrip ties with Tujia
Leading online travel agent Ctrip (Nasdaq: CTRP) is back to doing what it knows best, neutralizing competition through formation of savvy alliances with its rivals. In this case the company is taking aim at the market for short-term stays at private homes, with its announcement of a major new tie-up with homegrown industry leader Tujia. That alliance is seeing Ctrip merge its own homestay business with Tujia, in what looks like a clear shot at global leader and sector pioneer Airbnb. Read Full Post…
Bottom line: The scrapping of a buyout offer for Momo could reflect growing obstacles to re-listing in China, and could presage the abandoning of more similar buyout bids for US-listed Chinese companies.
Momo abandons privatization bid
In a relatively surprising development in the wave of privatization bids for US-listed Chinese companies, social networking app operator Momo (Nasdaq: MOMO) has just announced a group proposing to buy out the company has withdrawn its offer. No reason was given for the reversal, and instead Momo used the official announcement to focus on its latest financial results and outlook. The move came as a surprise because the buyout deal had very strong financial backing from a group that included e-commerce giant Alibaba (NYSE: BABA) and venture capital giant Sequoia Capital. Read Full Post…
Bottom line: Zhaopin’s slight raising of its privatization price could reflect minority investor complaints about undervaluation, while Autohome’s buyout price could rise up to 20 percent in a game of strategic maneuvering with Ping An.
Zhaopin raises buyout price
Minority investors have long complained that a wave of privatization bids for US-listed Chinese companies are grossly undervalued, and now the companies may finally be responding to those grievances. That’s my assessment based on the latest reports that say online recruitment site Zhaopin (Nasdaq: ZPIN) has quietly raised the bid price for its privatization plan, as valuation questions also threaten to derail a similar plan by online car site Autohome (NYSE: ATHM).
Minority investor complaints about undervaluation center on the fact that top managers often control a majority of their companies’ shares through direct and indirect relationships. That means they can choose whatever bid price they want and be assured of its acceptance at shareholder votes. But threats of lawsuits and rival bids, and also perhaps worries about being seen as greedy and unethical are forcing some of the management-led buyout groups to rethink their prices and offer more. Read Full Post…
Bottom line: Autohome and E-House are both likely to complete their privatizations from New York, continuing the migration of US-listed Chinese firms returning home to seek higher valuations on China’s stock markets.
Autohome drives away from New York
The drive back home for New York-listed Chinese companies continues as we head into the new week, with online car site Autohome (NYSE: ATHM) becoming the latest to announce a privatization plan. In a slightly unusual twist to that story, Autohome shares actually rose above the offer price before the buyout deal was announced, suggesting investors were hoping for a bigger premium than the one offered. But they quickly fell back to the offer price in after-hours trading.
At the same time, online real estate company E-House (NYSE: EJ) announced it has signed a definitive deal to privatize, nearly a year after it first announced its plan to de-list from New York. E-House’s plan has gone down a windy road since it was first announced last June at the height of a rally that saw China’s stock markets more than double in a year. Since then Chinese markets have tanked twice, and are now about 40 percent lower than where they were when E-House first announced its offer. Read Full Post…
Bottom line: A sudden spate of new mega-fundings by Meituan-Dianping, Lufax and JD Finance show there is still big interest in China’s private tech and finance sectors, despite the nation’s rapidly slowing economy.
Investors throw billions at Meituan-Dianping, Lufax, JD Finance
It seems I may have been a bit premature with my recent prediction that the mega-fundings that crested in China a year ago were finished. That’s my assessment after reading about 3 new mega-deals in the tech sector this week, all worth more than $1 billion. Leading the pack was recently merged group buying giant Meituan-Dianping, whose whopping $3.3 billion in new funding values the company at $18 billion.
That latest news came just a day after media reported another deal that saw peer-to-peer (P2P) lending giant Lufax just raise its own new funding of $1.2 billion, valuing the firm at $18.5 billion. Last but not least was announcement at the start of the week that the finance unit of e-commerce giant JD.com (Nasdaq: JD) had just raised 6.65 billion yuan, or just over $1 billion, valuing the firm at 46.7 billion yuan ($7 billion). Read Full Post…
Bottom line: Alibaba’s spin-off of its C2C marketplace for second-hand goods could reflect a new trend for big Internet firms to separately run individual assets, while LeTV may have provided most of the money in the first funding round for its smartphone unit.
Taobao spins off Xianyu
A couple of fund-raising headlines are spotlighting emerging trends in China, including a nascent move by big companies to spin off smaller units as separately run and funded entities. That move was center stage in new reports that e-commerce juggernaut Alibaba(NYSE: BABA) is spinning off its Xianyu marketplace that specializes in sales of second-hand goods between consumers.
The second headline comes from online video high-flyer LeTV(Shenzhen: 300104), and spotlights a trend that shows rapidly cooling investor sentiment towards overheated sectors like video and smartphones. That news has LeTV declining to name any of the backers in the first funding round for its fledgling smartphone unit, hinting that no serious investors were interested in this particular opportunity that raised $530 million. Read Full Post…
Bottom line: Weibo’s investment in mobile video app Miaopai looks like a smart move to build on its recent momentum, while 58.com’s spin-off of its Guazi used car service is mostly a management restructuring.
58.com spins off Guazi used car site
A couple of web-related fund-raising stories are in the headlines today, though their relatively small size reflects investor sentiment that is rapidly fading towards these money-losing Internet companies. The bigger of the 2 deals has short video app Miaopai raising $200 million, in a funding round led by China’s Twitter-like Weibo(Nasdaq: WB). The second has leading online classifieds site 58.com (NYSE: WUBA) spinning off its Guazi used car businesses, in a move aimed at giving the company more flexibility to raise money for its future growth.
The $200 million figure is one of the largest we’ve seen in recent months, but is well below mega-fundings in the first half of this year when China’s stock markets were rallying and fundings of $1 billion or more were almost ordinary. But the flow of money has slowed sharply in recent months as investors get impatient for profits, forcing a number of former rivals into mergers to accelerate their drive to profitability. Read Full Post…
Bottom line: New O2O take-out dining investments involving companies backed by Tencent and Alibaba reflects intensifying competition in the space, and is likely to result in a costly price war for market share.
Alibaba, Tencent in new take-out dining investments
The take-out dining space continues to heat up, with word of a major new funding for Ele.me, the service backed by social networking giant Tencent (HKEx: 700), and a big new investment for Koubei, the service owned by e-commerce leader Alibaba (NYSE: BABA). Both investments reflect a recent rush into online-to-offline (O2O) services by all 3 of China’s top Internet companies, as each tries to forge a hybridized mix of services that are likely to make up the retailing landscape of the future.
The larger of the 2 deals has Ele.me raising as much as $630 million in new funding, in a deal that brings in existing investors Tencent, along with its main e-commerce partner JD.com (Nasdaq: JD) and several other major private equity firms. The second has Koubei, Alibaba’s recently resurrected take-out dining site, investing a more modest 300 million yuan ($50 million) in a rival that operates the service called SHBJ.com. Read Full Post…
Bottom line: Airbnb should have a strong chance for success in China, thanks to its good choice of local partners, strong experience in its field and relatively little competition from homegrown rivals.
Airbnb hangs out China shingle
Not too many foreign Internet companies are coming into China these days, mostly due to the poor track record for previous big names. But that lackluster record of isn’t deterring online travel site Airbnb, which has been quite high-profile with a formal announcement of its entry to China.
The road into China is littered with cases of failure, with big names like Google (Nasdaq: GOOG), eBay (Nasdaq: EBAY), Yahoo (Nasdaq: YHOO) and Groupon (Nasdaq: GRPN) all entering the market at various times, only to withdraw later. In most cases companies failed to anticipate stiff competition, which was ready to use many tactics the big international names considered unacceptable. Failure to adapt to local tastes was also a factor, as many of these big names tried to use identical business models for China that they did in the west. Read Full Post…
Bottom line: Jin Jiang’s purchase of a large Chinese hotel operator reflects its ambitions to become a leading player in China’s slowing market, though it could be undermined by its roots as a state-run company.
Jin Jiang to take control of Plateno
We’re finally seeing some big consolidation start to happen in China’s crowded hotel industry, with reports that Shanghai-based operator Jin Jiang (HKEx: 2006; Shanghai: 600754) is near a deal to buy the parent of formerly New York-listed 7 Days. The move comes just 7 months after Jin Jiang made another major purchase in Europe, and signals the company is clearly becoming a player to watch in China’s lodging space.
China’s hotel industry is undergoing some major changes right now, as the market suffers from oversupply created during a major build-up in the first decade of the 21st century. Leading player Homeinns (Nasdaq: HMIN) is in the process of privatizing after its stock languished on Wall Street due to lackluster growth prospects. China Lodging Group (Nasdaq: HTHT), operator of the Hanting chain, also made a major move late last year when it announced a major tie-up with French hotel giant Accor (Paris: AC). (previous post) Read Full Post…
