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VIPSHOP latest Business & Financial news from Doug Young, the Expert on Chinese E-Commerce Companies

China Auto IPO Crashes 神州租车的IPO之梦告吹

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The winter for China IPOs in New York has officially moved into deep freeze with the official announcement that car rental specialist China Auto, the first Chinese company to file for a US listing back in January, has formally scrapped the offering. (Chinese article) The official withdrawal, made in a filing to the US securities regulator, marks the end of a choppy story that saw the money-losing China Auto filled with optimism when it initially filed for a Nasdaq IPO to raise up to $300 million in January, hoping that US investor skepticism towards Chinese companies had eased following a confidence crisis the previous year due to a series of accounting scandals. The first signs that perhaps the climate hadn’t improved too much came in the next couple of months, when China Auto’s IPO failed to make much progress, presumably due to lack of investor interest. The situation got worse still when online discount retailer Vipshop (NYSE: VIPS) did finally become the first Chinese company to list in the US in March, but only after it had to drastically scale back the offering due to anemic demand. (previous post) And even then, its shares priced below their original range and dropped sharply in their first few trading days. Despite that dismal performance, China Auto moved ahead with its own offering, which also met with anemic demand that forced it to halve the size of its original capital raising plan. But even that reduced plan soon looked ambitious, and it ended up suspending the offering just hours before it was set to price in late April. (previous post) The aborted offering means we could soon go an entire year with just one new listing for a Chinese company in the US. The last major listing before the current freeze came back in August last year, when online video company Tudou (Nasdaq: TUDO) forged ahead with its IPO despite a weak market, with the result that the stock dropped sharply on its trading debut. (previous post) The CEO of the New York Stock Exchange’s operator said in an interview earlier this week that only 7 Chinese companies went public on NYSE Euronext stock exchanges last year, a third of the 22 companies that made IPOs on its exchanges in 2010 when Chinese companies — especially in the Internet sector — were investor darlings. (English article) If current trends continue, we could see just 1 company list on the NYSE for all of 2012, which undoubtedly would be a low not seen for many years. There’s still a possibility we could see 1 or 2 other offerings proceed, especially one for Shanda’s online literature unit, Cloudary, which appears to be moving forward after the company reported a surprising profit in its latest quarter. (previous post) But if that IPO also fizzles, which is a strong possibility, look for the winter for Chinese IPOs in New York to easily continue until this fall, and quite possibly through the end of the year.

Bottom line: China Auto’s official withdrawal of its New York IPO shows the current winter for US-listed Chinese offerings continues, and could easily last through the end of the year.

Related postings 相关文章:

◙ Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹

◙ IPOs: China Auto Slashes, People’s Daily Marches Ahead IPOs:神州组车减，人民网启动

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

Tencent E-Commerce: Another Money Loser IPO 腾讯电商：将又一个失败的

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I was amused to read this morning that Internet titan Tencent (HKEx: 700) may choose its money-losing e-commerce platform for its first IPO, following its recent reorganization into 6 business units to allow each of those areas to sink or swim by themselves. The reports are a bit unclear about the timing of a potential IPO, and indeed say that such an offering is just one possibility for the newly formed unit as it seeks to raise more money to eventually create a broader e-commerce platform, presumably similar to Alibaba’s highly successful TMall. (English article) If that’s the case, I hope that executives are reading the newspapers these days, as investor appetite for money-losing Chinese Internet IPOs is extremely low these days and showing no signs of improving anytime soon. The only company to make an overseas Internet IPO this year so far has been Vipshop (NYSE: VIPS), a money-losing discount retailer, and that was a complete disaster. Other potential offerings from Shanda’s online literature unit, called Cloudary, and leading group buying site LaShou have all been delayed or disappeared completely, although Shanda appears to be moving ahead with its offer after its surprise disclosure that Cloudary recently turned profitable. (previous post) In terms of Tencent’s e-commerce business, it seems to me like the unit’s biggest asset is the Tencent name itself, since Tencent is clearly China’s biggest Internet firm and its leading player in online games and instant messaging. On the other hand, Tencent has had much less success in areas like e-commerce, which rely on an older, more cash-rich demographic of users unlike games and its instant messaging that tend to draw people in the 15-25 year old age range. Tencent’s newly formed e-commerce unit contains its older Paipai online auctions business, also known as C2C, along with a more recently established B2B platform that I’ve never heard of. The unit’s new head says that one of its strengths is its strong social networking element, which presumably helps to create a community among online buyers. Social networking is certainly one of Tencent’s strengths, but I doubt whether its core base of young users, with their low consuming power, would be very attractive to most e-commerce sellers. All that said, I wouldn’t expect to see Tencent make an IPO for this new e-commerce unit anytime soon due to the current frosty market. If I were advising Tencent founder Pony Ma on how to proceed, I would tell him to make an IPO first for one of the company’s more successful units, such as its social networking or online games business, which would certainly create a bit more excitement among investors. But if e-commerce does go first in the march to market for these new little Tencents, look for weak investor interest and a stock that probably won’t go anywhere but down after its trading debut.

Bottom line: Tencent’s spin off and potential IPO for its money-losing e-commerce unit looks like a poor choice for its first IPO following its recent reorganization.

Related postings 相关文章:

◙ Tencent: Preparing for Breakup? 腾讯或为分拆铺路

◙ Shanda Cloudary Wows Investors With Profit 盛大文学利润令投资者惊叹

◙ Tencent in Monopoly Spotlight; Baidu Next? 腾讯被诉垄断 下一个是百度吗？

News Digest: May 15, 2012 报摘： 2012年5月15日

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The following press releases and media reports about Chinese companies were carried on May 15. To view a full article or story, click on the link next to the headline.

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◙ China Mobile (HKEx: 941) Responds to Obstacles in US, Believes Will Get License (Chinese article)

◙ Suning.com (Shenzhen: 002024) Launches Wine Channel (English article)

◙ DTS (Nasdaq: DTSI), Lenovo (HKEx: 992) Bring High-Definition Audio to Smart TVs (Businesswire)

◙ Renren (NYSE: RENN) Announces Unaudited Q1 Financial Results (PRNewswire)

◙ Vipshop (NYSE: VIPS) Reports Q1 Financial Results (PRNewswire)

◙ Latest calendar for Q1 earnings reports (Earnings calendar)

IPOs: China Auto Slashes, People’s Daily Marches Ahead IPOs:神州组车减，人民网启动

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There’s quite a bit of new listings and delistings news out there today, led by word that car rental specialist China Auto’s (NYSE: CARH) stalled IPO is finally moving ahead, although only after being cut by half as overseas investors continue to show little or no interest in new Chinese offerings. That news comes as another auto rental firm with a similar name, AutoChina (OTC: AUTCF) has announced it is being sued by the US securities regulator, following its delisting from the Nasdaq last year at the height of the confidence crisis against US-listed China stocks. Last but not least, People’s Daily Online, the web site of the official newspaper of the Communist Party, is moving ahead with its own landmark IPO, kicking off the roadshow for an offering that will undoubtedly get a warm welcome from cash-rich Chinese investors who are also party members. Let’s start with China Auto, which has said it now hopes to raise up to $158 million from its IPO, with its New York trading debut set for April 26. (Chinese article) The new fund-raising target is about half of China Auto’s original goal of raising up to $300 million, announced when it became China’s first company this year to file for a US IPO back in January. (previous post) For unexplained reasons the company’s IPO disappeared for a while, and another firm, discount online retailer Vipshop (NYSE: VIPS) became the first Chinese firm to make a New York IPO 3 weeks ago in a dismal offering that showed overseas investors are still skeptical of Chinese firms following a series of accounting scandals last year. (previous post) I predict that China Auto, which posted a net loss of 118 million yuan in the first 9 months of last year, will price its shares at the bottom of their indicated range, and it will end up raising around $130 million. Despite that weakness, I wouldn’t be surprised if some bargain hunters rushed in and helped it to post a modest raise on it first trading day. Meantime, the unrelated AutoChina, which was delisted from the Nasdaq last year, has announced that it’s being sued by the US Securities and Exchange Commission for manipulating trading in its shares to make it look like there was more investor interest in the company than there really was (company announcement) My only comment in this situation is that it’s bad when a law firm sues your company for stock manipulation, but it’s really bad when the securities regulator sues you, and this could well mark the beginning of the end for AutoChina’s shares in the US, which now trade over-the-counter. Finally, there’s the People’s Daily website, which has kicked off its roadshow for a domestic IPO to raise up to 1.5 billion yuan, or about $240 million. (English article) I fully expect this landmark offering, a sign of China’s recent drive to liberalize the media sector, to be a huge success, boosted by cash-rich party members and their associates wishing to give Beijing some face. But from an investor point of view, I wouldn’t get too excited about this company over the longer term, as profits will clearly be a distant secondary priority for an organization so closely associated with the party.

Bottom line: China Auto’s upcoming IPO will price near the bottom of its range, but its share could post a modest rise on their trading debut boosted by bargain hunters.

Related postings 相关文章:

◙ China Auto Wins 2012 Race For 1st US IPO 神州租车抢先成首个赴美IPO的中国企业

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ 360Buy Heats Up E-Books, People’s Daily Goes to Market 京东商城高调进军电子书,人民网开启上市进程

China Tech Start-Ups: Coming Home? 中国科技企业扎堆国内上市？

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There’s an interesting report out this morning noting that a growing number of Chinese tech start-ups that once looked like strong candidates for New York IPOs are opting for home listings instead, deterred by higher scrutiny and weak sentiment overseas and a much friendlier — if not volatile — environment on ChiNext, China’s 2-year-old Nasdaq-style enterprise board. In the latest move on that front, Chinese media are reporting a company called Baofeng, maker of a popular online and cellphone video player, has filed to make a public listing on the ChiNext, reversing its plans last year when it said it would make a 2012 listing overseas. (Chinese article) Frankly speaking, Baofeng does have the exact profile of a company that would have traditionally gone to either the Nasdaq or New York Stock Exchange to raise funds as its first choice a year ago, followed by Hong Kong as a second choice and the ChiNext as a distant third. But much has changed from a year ago, when foreign investors were still quite bullish on Chinese Internet stocks, giving them relatively rich valuations compared with peers based in more developed western markets. Such stocks have suffered a major reversal of fortune over the last year, with investors dumping their shares following a series of accounting scandals that also led to higher regulatory scrutiny and the delisting of a number of smaller players. Amid all the scandals last year, China’s securities regulator also got involved, trying to insert itself into the overseas listing process as the central government also reportedly discussed either limiting or shutting down that process completely. As far as I know, nothing specific has happened yet in terms of new Chinese government oversight, though a number of big-name western investment banks have refused to underwrite New York IPOs for some China firms over concerns about their accounting. In one of the highest profile cases, Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) both reportedly resigned from an IPO last summer for leading group buying site LaShou, which went on to hire some smaller banks but has yet to make an offering. (previous post) The lone Chinese company that did make a New York IPO this year, discount retailer Vipshop (NYSE: VIPS) was an unqualified disaster, pricing well below its indicated range and falling 30 percent since its trading debut. This new report notes that Baofeng is just the latest example of a Chinese tech start-up going to ChiNext rather than overseas, following similar moves by firms like online game developers Wushen Century Network Technology and Suzhou Snail Game. It’s probably too early to say if this move to the ChiNext will be a long-term phenomenon, and I suspect these start-ups that list there will quickly discover the market’s high volatility is far less desirable than the more stable environments in New York and Hong Kong. But if the ChiNext can implement reforms to lower volatility in the market, perhaps by opening up to more foreign investors, it could seize this opportunity to quickly position itself as a strong alternative to New York and Hong Kong for China’s vibrant field of tech start-ups.

Bottom line: A recent move by tech start-ups to China’s Nasdaq-style enterprise board could become a viable IPO alternative if the board can create a more stable listing environment.

Related postings 相关文章:

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职

Overseas China Stocks on Hold, Waiting for Catalyst

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Overseas listed Chinese stocks have entered a sort of holding pattern these last few weeks, with investors neither embracing nor dumping them as the market waits for a catalyst to give some direction. A recent scathing Forbes report on security software maker Qihoo 360 (NYSE: QIHU) has done little to dent that company’s stock, reflecting an ebb in investor skepticism that battered such shares last year. (previous post) But the flop of the first IPO this year by a Chinese firm in the US, Vipshop (NYSE: VIPS), also shows investors are far from willing the embrace these stocks again. The needed new catalyst could lead the market either way, depending on what it is. Famous short seller Muddy Waters is hoping to provide that catalyst to lead the group lower, saying it will issue a new report in the next few weeks on several Hong Kong-listed China stocks. (Chinese article) But a blockbuster IPO in either Hong Kong or the US could lead the market higher if the right company emerges to rekindle investor interest in the China growth story. These last few weeks have been full of mixed signals, both on the plus and minus side for this group of entrepreneurial firms whose shares were hammered  last year by a series of accounting scandals that undermined the entire sector’s credibility. Negative sentiment led to a halt in new overseas listings dating back to last summer, when a disastrous IPO for online video sharing site Tudou (Nasdaq: TUDO) sent the market into hibernation. Vipshop, a money-losing online discount retailer, tested the waters to see if sentiment had improved last month by making the first IPO by a Chinese company in the US for more than half a year. Unfortunately, it discovered investors were still highly skeptical, as its shares priced below their previously indicated range and then fell another 15 percent on their trading debut. (previous post) Its shares continued to fall after that, and now trade at about two-thirds of their IPO price. But then weeks later, Forbes issued a scathing report on Qihoo 360 questioning a number of its accounting practices and implying that its auditor, Deloitte, might resign the account later this year. That report followed a similar one late last year by a small research house named Citron, whose motives were more obvious due to its status as a short seller. Despite both reports, however, Qihoo shares have remained remarkably stable in their current range, indicating investors aren’t as willing to believe negative news as they were last year, when new short selling reports were coming out almost weekly. So, what exactly is the market waiting for? In my view, it wants a clear signal one way or the other on the China market’s growth potential and the accounting issue. Muddy Waters founder Carson Block clearly wants his firm to be a catalyst in the negative direction by saying he will soon issue a report on Hong Kong-listed Chinese firms that will presumably show more problems. At the same time, a solid IPO by a good Chinese firm could easily attract investors back to the space if a good candidate comes along. That would mean China would have to find a company that is posting both strong double-digit revenue growth and is also profitable, with the profits being especially important for investors wary of buying into money-losing companies. Such companies do exist, with e-commerce leader Alibaba being the most notable example. Unfortunately, Alibaba has shown no signs of making an IPO anytime soon, and other companies with a similar profile are far from plentiful. The handful of other companies that have filed for US IPOs so far this year, including car rental firm China Auto and online literature firm Shanda Cloudary, are both losing money despite their strong growth potential, meaning neither is likely to provide the right tonic the market needs to rekindle positive sentiment. I would bet the Muddy Waters’ report will do little to further undermine investor confidence, though a resignation by Deloitte or another major auditor from a big Chinese company could send the market back into a tailspin. In the meantime, investors will be waiting for the arrival off a white knight like Alibaba to make an IPO and breathe new excitement into the market — something also unlikely to happen until the second half of the year at earliest.

Bottom line: Shares of overseas listed Chinese stocks are likely to remain in a state of limbo until a major catalyst comes, either in the form of a new accounting scandal or a blockbuster IPO.

Related postings 相关文章:

◙ Qihoo: The Next Accounting Victim? 奇虎360：下一个会计丑闻受害者？

◙ China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

◙ Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和

China IPO Winter Goes On as Vipshop Flops 唯品会大跌，中国IPO冬季持续

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My earlier forecast that spring may soon arrive for US-listed China stocks may have been premature, as the year’s first IPO by Vipshop (NYSE: VIPS), a money-losing online discount retailer, has been a resounding flop just about any way you look at it. Some might say the fact that Vipshop completed the IPO at all is an accomplishment, and perhaps that’s true since its offering is the first major one by a Chinese company in New York for more than half a year. But the results of the offering and its share trading debut are both dismal from any perspective. The company initially hoped to raise up to $117 million when it first filed for its IPO, and later set a price range of $8.50 to $10.50 per American Depositary Share. But in a relatively rare development, it couldn’t even price the offering within that previously stated range, and ended up having to offer shares at $6.50 each — 24 percent lower than the bottom of the range. (English article; Chinese article) That meant the company only raised $71 million in the process, again nearly 40 percent less than the top end of its original target. Clearly investors weren’t very interested in this money-losing web firm, as overall sentiment towards US-listed Chinese companies remained weak due to a series of accounting scandals last year. If the early signals weren’t loud enough, investors voiced their lack of interest in Vipshop one last time on its Friday trading debut, bidding the shares down 15 percent to end the day at $5.50, giving it a market capitalization of $268 million. The offering marked a decidedly worse performance than the last major US offering by a Chinese company, video sharing site Tudou (Nasdaq: TUDO), whose miserable debut last August prompted other IPO candidates to indefinitely postpone their listings until the market improved. Tudou, which was also losing money, priced its offering in the middle of its range, and then saw its shares tumble 12 percent on their first trading day. So if Tudou was a failure, then it’s probably fair to call Vipshop a disaster. Vipshop is a relatively small player in China’s e-commerce space whereas Tudou is the second largest online video site, so it may not be completely fair to compare the 2. Still, the message from this latest offering is loud and clear: investors aren’t interested in Internet companies that are losing money, and even profitable companies would need to be leaders in their categories to attract much attention. That poses an interesting challenge for the handful of other companies that are moving ahead with listings. China Auto, the earliest company to file for an IPO this year, could still do ok as it’s not an Internet company and is a leader in the auto rental space. Shanda Cloudary and LaShou could be more problematic, as they’re leaders in the online literature and group buying spaces, respectively, but both are still losing lots of money. I expect all 3 of these companies to move forward with their offerings despite this chill from the Vipshop debut, but would look for all to see similar weak pricing and drops on their trading debuts.

Bottom line: Vipshop’s dismal IPO and trading debut indicate overseas investors still have little appetite for money-losing companies in China’s crowded Internet space.

Related postings 相关文章:

◙ Vipshop Takes Lead in IPO Race 维品会或成为今年首家赴美上市中国企业

◙ Outlook Cloudy As Shanda Refiles for Literature IPO 盛大文学重启赴美IPO计划

◙ China Auto Wins 2012 Race For 1st US IPO 神州租车抢先成首个赴美IPO的中国企业

News Digest: March 24-26, 2012 报摘： 2012年3月24-26日

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The following press releases and media reports about Chinese companies were carried on March 24-26. To view a full article or story, click on the link next to the headline.

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◙ Vipshop (Nasdaq: VIPS) Falls 15.38 Pct on Trading Debut (Chinese article)

◙ China’s ZTE (HKEx: 763) to “Curtail” Business in Iran (English article)

◙ 360Buy to Go Global (English article)

◙ Camelot Information Systems (NYSE: CIS) Announces Unaudited Q4 and Full-Year Results (PRNewswire)

◙ Ming Yang (NYSE: MY) Announces Preliminary Results for Q4 and Full Year 2011 (PRNewswire)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)

News Digest: March 15, 2012 报摘： 2012年3月15日

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The following press releases and media reports about Chinese companies were carried on March 15. To view a full article or story, click on the link next to the headline.

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◙ Tencent (HKEx: 700) Announces Full-Year Results for 2011, Dividend (HKEx announcement)

◙ Vipshop to List on NY Stock Exchange on March 23 – Source (Chinese article)

◙ ICBC (HKEx: 1398) Appears to Back Away From Pakistan-Iran Gas Pipeline (English article)

◙ Spreadtrum (Nasdaq: SPRD), Micromax Partner on Handsets in India, Emergings Mkt (PRNewswire)

◙ Tudou’s (Nasdaq: TUDO) Wang Says Pay Hikes, No Cuts After Youku (NYSE: YOKU) Merger (Chinese article)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)

Vipshop Takes Lead in IPO Race 维品会或成为今年首家赴美上市中国企业

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The race to make China’s first New York IPO of 2012 is nearing the finish line, with online discount retailer Vipshop emerging as the likely winner after getting off to a late start.The listing will mark not only the first Chinese IPO in New York this year, but also the first in months following disastrous debuts for a few companies that launched offerings last summer at the height of a confidence crisis towards US-listed Chinese stocks after series of accounting scandals. I previously said that growing signs are emerging that the worst of the crisis has passed (previous post), and at least the initial response to Vipshop’s offering appears to confirm that trend. According to a domestic media report, Vipshop has set the price range for the offering at $8.50 to $10.50 per share, meaning it would raise $95 million at the low end of the range and up to $120 million if it can get the highest price. (Chinese article) This range is quite significant, as it is unchanged from Vipshop’s announcement in its first public filing that it planned to raise up to $120 million from the IPO. (previous post) That means that investor reception to the offering was within expectation, unlike last year when many companies had to sharply scale back their capital raising plans after receiving weak or no investor demand at the height of the crisis. Online video site Tudou (Nasdaq: TUDO) became a symbol for how bad things were when it went ahead with its Nasdaq IPO despite awful sentiment last August, with its shares tumbling 12 percent on their first trading day. They continued their downward spiral after that, along with most other US-listed China firms, and now trade at just over half their IPO level. Vipshop became China’s second company to file for a New York IPO last month, following another application by car rental specialist China Auto which planned to raise up to $300 million. Online entertainment specialist Shanda has also filed for an IPO for its Cloudary online literature unit, but the Vipshop plan now looks like the furthest advanced and thus the likely winner. I would expect to see it price near the bottom end of its range as some investor skepticism remains, with its shares likely to trade flat on their debut. But even that kind of performance would be a huge improvement over last year, and would likely spark a flurry of refilings for many of the IPOs that got pulled last year as companies rush to take advantage of a new window of improved sentiment. If that happens, look for companies like online clothing retailer Vancl to file in the next 2 months, and even possibly from group buying leader LaShou, which is reportedly preparing to refile for an IPO after its previous plans also ran into trouble last year.

Bottom line: Vipshop’s New York IPO, the first for a Chinese firm this year, is likely to price near the bottom of its range, but would still mark a sign of improving investor sentiment for China stocks.

Related postings 相关文章:

◙ Vipshop Vies For First Internet Listing of 2012 唯品会欲在赴美上市电商公司中力拔头筹

◙ Debut Offshore IPO Looks Weak, But Not So Bad 阳光油砂上市首日表现差强人意

◙ Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和

News Digest: March 10-12, 2012 报摘： 2012年3月10-12日

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The following press releases and media reports about Chinese companies were carried on March 10-12. To view a full article or story, click on the link next to the headline.

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◙ MIIT to Allow Private-sector Investment in Telecom Infrastructure (English article)

◙ Zhejiang Geely, Volvo in Technology Transfer MOU (HKEx announcement)

◙ Home Inns (Nasdaq: HMIN) Reports Q4 and Full Year 2011 Results (PRNewswire)

◙ China Car Sales Have Worst Start Since 2005 as Economy Slows (English article)

◙ Vipshop Sets IPO Share Price Range at $8.5 to $10.5, to Raise Maximum $120 Mln (Chinese article)

◙ Latest calendar for Q4 earnings reports (Earnings calendar)