Bottom line: China’s “Big 3” Internet tycoons are likely to see their fortunes continue to grow at rates far faster than the broader economy over the next year, and they could even overtake some wealthier real estate magnates.
Jack Ma named China’s richest Internet tycoon
Hong Kong’s Li Ka-shing may still lead the list of wealthiest men in China and Hong Kong, but his traditional formula for success is rapidly losing ground to China’s fast-rising Internet magnates. The heads of China’s “Big 3” Internet firms were all among the top 10 people on this year’s just-published Forbes list of the wealthiest men in China and Hong Kong, spotlighting the huge role that the Internet is playing in China’s economy. Whereas Li’s fortune took decades to build, the founders of Alibaba (NYSE: BABA), Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU) made their fortunes much more quickly, mostly over the last decade. Read Full Post…
Bottom line: Government officials are being forced to deal carefully with newly minted Internet giants like Alibaba, which sometimes commit transgressions due to their youth but also provide huge contributions to China’s economy.
Alibaba a double-edge sword for govt
A trio of stories about Alibaba (NYSE: BABA) nicely summarize both the risks and benefits that China’s Internet juggernauts present for the government, which must walk a fine line between taming these newly minted giants while being careful not to kill such economic powerhouses. In just the space of a decade, Alibaba, alongside Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU), have grown rapidly from venture-funded start-ups to become some of the world’s most valuable companies.
That growth and status has brought not only big prestige to China, but also valuable tax dollars to local governments and high-tech jobs that Beijing wants to replace lower-tech manufacturing labor. But at the same time, such young companies are particularly vulnerable to missteps, which can create chaos in the marketplace and Beijing needs to be careful to control. Read Full Post…
Bottom line: 58.com’s new Ganji tie-up looks like a smart partnership that should create a clear industry leader with a strong strategic partner in Tencent, though the stock could be set for a short-term correction due to overvaulation.
58.com buys 42 pct of Ganji
China’s Internet has just gained a major new player through the combination of online classified sites 58.com (NYSE: WUBA) and Ganji, which together will have a market value approaching the $10 billion level. Few companies outside the “Big 3” of Baidu (Nasdaq: BIDU), Tencent (HKEx: 700) and Alibaba (NYSE: BABA) can boast such valuations, and this particular deal seems to mark the emergence of a new sector leader that could even become an acquirer on the global stage.
Of course it’s easy to talk about going global, but actually doing that has been far more problematic for China’s booming field of Internet players. Still, this latest deal appears to show that 58.com may have the savvy that some of its larger rivals lack to make the global push, perhaps using this Gangji deal as a template for more strategic acquisitions in developing markets similar to China. Read Full Post…
The following press releases and media reports about Chinese companies were carried on April 18-20. To view a full article or story, click on the link next to the headline.
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58.com (NYSE: WUBA) Acquires Strategic Stake In Ganji, Investment by Tencent (PRNewswire)
E-Commerce Trust Services Firm Baozun Files For $200 Mln US IPO (Chinese article)
Bond Interest Default Looms For Solar Products Maker Baoding Tianwei (Chinese article)
After 8 Years Of Failing, Baidu (Nasdaq: BIDU) Shuts Japan Search Engine (English article)
China Minsheng Investment Corp To Invest 15 Bln Yuan In 2 GW Solar Farm (Chinese article)
Bottom line: Shares of Tencent and Alibaba are overvalued and will stagnate or fall for the rest of the year, while a group trying to buy out Sungy Mobile may have to raise its offer but should succeed in privatizing the company.
Froth builds on Tencent stock
It seems I was partly wrong when I previously said that e-commerce giant Alibaba (NYSE: BABA) was quite expensive following its record-breaking IPO last year, and that its value would gradually sink to a level comparable with rival Tencent (HKEx: 700). In this case I wasn’t wrong in thinking the 2 companies should be comparably valued. Instead, I should have focused on the potential for a rally in Tencent shares, which have risen sharply to approach Alibaba’s level since the start of the year.
While those 2 companies look comfortably situated in the stratosphere of Internet valuations, the same can’t be said for mobile game operator Sungy Mobile (Nasdaq: GOMO), which has just announced its receipt of a management-led buyout offer. If the attempt succeeds, it would mean Sungy’s life as a publicly traded company could end after less than 2 years, the briefest for a listed Chinese company that I’ve ever seen. Read Full Post…
The following press releases and media reports about Chinese companies were carried on April 14. To view a full article or story, click on the link next to the headline.
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Bottom line: Shares of Sina and its Weibo unit could come under pressure this week and for the next few months, as the regulator pushes for a clean up of its core news sites amid a broader Internet clean-up campaign.
Regulator clamps down on Sina news sites
A year-old Internet clean-up by Beijing is coming full circle to where it first began, with word that regulators have criticized and warned online stalwart Sina (Nasdaq: SINA) for failing to adequately censor its core web portal business. China Internet followers may recall that this prolonged clean-up began almost exactly a year ago when Sina’s video license was suspended after pornographic content was discovered on its literature and photo-sharing sites. (previous post) That case wasn’t too alarming since video is quite peripheral to Sina’s business. By comparison, this latest case looks a bit more worrisome, since it involves the portal news business that accounts for a big portion of Sina’s core advertising revenue. Read Full Post…
Bottom line: ICBC is likely to ultimately get approval to buy 20 percent of Taiwan’s SinoPac Financial, while Bright Food’s newly closed purchase of Israel’s Tnuva should boost its bid to become China’s first global food group.
Bright Food closes Tnuva buy
I got a sense of deja vu on reading the latest announcement from ICBC (HKEx: 1398), saying China’s leading lender has extended a deadline to buy 20 percent of Taiwan’s SinoPac Financial (Taipei: 2890), 2 years after the tie-up was first disclosed. That’s because this deal looks strikingly similar to another proposed tie-up between leading Chinese telco China Mobile (HKEx: 941; NYSE: CHL) and one of its Taiwan peers, which ultimately crumbled after repeated extensions. In both cases political sensitivities undermined the deals, though such sensitives could play less of a role in the ICBC-SinoPac deal.
At the same time, I’ll also admit my surprise to read that another sensitive deal has closed that will see Shanghai-based food giant Bright Food Group buy Tnuva, Israel’s largest dairy. That deal was first announced about a year ago, but concerns were quickly raised that Israel might veto it over national security concerns. But the latest reports say the purchase has finally closed, handing Bright a major victory in its quest to become China’s first global food giant. Read Full Post…
Bottom line: Rallies for Renren and 500.com stock on positive news are likely to be short lived due to both companies’ limited prospects, while 55Tuan’s IPO is likely to see more delays and its shares are unlikely to debut next week
500.com prepares to go back online
As we head into the long weekend for the Easter and Tomb Sweeping holidays, a string of developments are providing a bit of cheer to shareholders of embattled social networking site Renren (NYSE: RENN) and online lottery ticket seller 500.com (NYSE: WBAI). Renren’s good news comes in a newly announced Dutch auction for its stock, a variation of traditional share buybacks. At 500.com, the good news comes in the form of chatter that Beijing will soon roll out new policies that pave the way for resumption of the online lottery ticket sales that are the company’s main business.
Bottom line: A round of April Fool’s Day pranks by China’s Internet companies marks a nice break from their usual cut-throat tactics, while the soaring valuation for a newly created taxi app leader looks more typical for the sector.
Internet firms get into April Fool’s spirit
It’s a relatively quiet news day as we head into April, so I thought I’d take a break from all the latest crackdowns and controversies by looking at some of the clever pranks played by China’s top Internet names on April Fool’s Day. At the same time, one company that’s in no fooling mood is a new taxi app giant that’s being formed with a merger of the 2 top players, and could soon receive an impressive $8.75 billion valuation after a new investment.
These 2 particular headlines don’t really have much in common, since one is largely playful and meant to be fun while the other involves the far more serious business of determining a company’s value. The April Fool’s stories are a nice break from the usual competition and wars of words that are standard fare on China’s Internet. By comparison, bidding up valuations to inflated levels like we’re now seeing with the pending merger of DidiDache and Kuaidi Dache has become standard fare on China’s Internet, as investors bet big on future growth in the market. Read Full Post…
Bottom line: New moves against e-commerce and online video firms are extensions of a broader crackdown on rogue Internet practices, which will slow short-term growth at some companies but ultimately create a healthier business environment.
E-Commerce in China
Crackdowns widen on video, e-commerce
It seems like I write about the latest Internet crackdown far too often these days, as Beijing focuses on a wide range of industries where it wants to clean up what it sees as unhealthy business practices. Another 2 such crackdowns are in the headlines as we head into spring, one in the scandal-wracked e-commerce space and the other in online video. Both crackdowns actually began earlier, and these latest moves just show the regulators don’t feel that their job is finished yet.
Of course it’s a slight oversimplification to say this broader series of crackdowns is coming from a single source, since the commerce regulator has been the main driver behind the e-commerce crackdown and the broadcasting and publishing regulator is behind the video clean-up. But those 2 concurrent campaigns, along with other similar ones, probably underscore a recent resolve by central leaders in Beijing to clean up a Chinese business landscape that’s often riddled with corrupt and illegal practices. Read Full Post…
