Tudou (土豆) made its formal debute on the Nasdaq on Wednesday the 17th, US time with the ticker symbol TUDO. According to the IPO, Tudou was valued at 822 million dollars, less than one-third the value of its competitor Youku (优酷), which has a current valuation of about 3 billion dollars. It’s the first day on the market, and Tudou shares have since dropped by 11.9%.
Both Tudou and Youku actually submitted their applications to Nasdaq around November of 2010. However, perhaps due to Tudou’s CEO’s divorce dispute, Tudou’s IPO was delayed until much later this year, allowing Youku to be the first Chinese video portal to hit the market.
There has also been a talk of a potential acquisition of Tudou by Baidu, China’s most popular search engine. Indeed, they’ve been in talks with each before. Youku previously stated that if Tudou’s IPO doesn’t go well, they may also be interested in a merger.
YI LI THINKS THE TIMING IS POOR
Yi Li (李易), vice president of the China Mobile Internet Industry Alliance thinks that Tudou didn’t pick the best time for an IPO. Yi Li said the ideal time for China concept stocks was the end of 2010 and the first half of 2011. He thinks that interest in such stocks cooled off starting a couple of months ago and won’t pick up again for about another year or perhaps even longer. Tudou was so anxious to raise funds to keep us with high operation costs and copyright expenses that they jumped in now even though they’re selling at a discount compared to what they could’ve been valued at half a year earlier or a year from now.
AN ACQUISITION MORE LIKELY
With regards to an acquisition, Li Yi said that the IPO doesn’t necessarily conflict with a potential acquisition. There have been lots of talks recently about Baidu being in talks with Tudou about an acquisition. In fact, acquisition and an IPO were both potential solutions to the same issue. Tudou needs money or else they’ll be in a bad position to compete with the other two major Chinese video platforms. They had two options to raise money: an IPO or an acquisition.
WHAT I THINK
From what I’ve seen, most seem to think that Tudou’s IPO wasn’t at the best time. Perhaps it wasn’t – but what will really determine whether or not this is a good movie is how Tudou makes use of this greater investment in the future. The video sites with greater investment, such as Youku, Sohu, Qiyi, Ku6 and others, are at an advantage and will move forward. Those without much money to spend will not be able to greatly improve their operations or purchase the rights to the content that will attract more users. Tudou is now in a position in which they can further expand.
What do you think?
Yi Li Interview source: http://www.china.com.cn/ipo/2011-08/17/content_23229178.htm