The pros and cons of Renren's IPO - Jeremy Goldkorn

Jeremy Goldkorn by Fantake via Flickr

The valuation of China's leading social network Renren has done up dramatically just ahead of its IPO on Wednesday. Jeremy Goldkorn explains in Seeking Alpha why both excitement and caution should lead the investors.
On the pros: It is probably the closest a Chinese internet firm can come to Facebook. Renren has a highly competitive management with much experience in social networks. It has build up a close relationship with (potential) advertisers and is making some money.
On the cons: Renren is not China's equivalent of Facebook and is facing at home a brutal competitive landscape. And while it might make money in the future, is does not do it yet.

More in Seeking Alpha.

Jeremy Goldkorn is one of the leading voices on China's internet scene. He is also a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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The booming value of online game firms - Marc van der Chijs

Marc van der Chijs

Online gaming has developed in the past five years from a niche market into a booming industry, writes former Spil Games Asia CEO Marc van der Chijs in his weblog. Valuation for gaming companies like Zynga and Playdom have gone up dramatically and valuations will continue to rise.

Times have changed though, nowadays online games are everywhere. Especially social games like Farmville managed to get a lot of new people to start playing games. In the early days social networks helped the growth as well: if your friends invite you to play a game the chance that you will try out the game is a lot higher...

Companies like Zynga (7bn USD) and Playdom (750ml USD) are exceptions, but others see their value also go up:

But for non-social game companies valuations so far where a bit lower. It seems that may be changing though and that investors are starting to realize the potential of these companies. This week it was announced that Bigpoint raised a USD 350 million round at a USD 600 million valuation. The company is not a social game company but focuses on browser based MMO (=massive multiplayer online) games, that are free to play. Bigpoint earns its money with virtual items as well, just like Zynga and Playdom. The big difference is that Bigpoint owns most of its users and is not dependent on a site like Facebook.
I expect that valuations for many other online game properties will go up in the near future, especially for those companies that get a large part of their revenues from virtual goods and that are not dependent on Facebook for their traffic. It will be interesting to see at which valuation these companies are able to raise rounds – or are snapped up by players like Zynga looking to have their own traffic! Based on what I am hearing in the market the revenues of many of these players are doubling every year because of virtual items (just like Bigpoint) and I won’t be surprised to see a billion dollar IPO for one of them within the next 18 months.

Marc van der Chijs is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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Do not invest in Dangdang and Youku - Shaun Rein

Shaun Rein by Fantake via Flickr

US investors should be very cautious spending their money on Chinese companies like bookseller Dangdang or video hosting company Youku who have no clear business model or otherwise a hard time to show a profit, warns Shaun Rein in this debate on CNBC.
While China's economy has been doing pretty well, especially Chinese companies who list in the US, because they do not qualify to list in China itself, should not be touched.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference, do get in touch.

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Pin the nail on the donkey investment decisons - Amy Sommers

Amy Sommers by Fantake via Flickr

China stocks are hot at the US markets, whether they go IPO or through merging a shell, while class action law suits against Chinese companies go up. Shanghai-based lawyer Amy Sommers looks in Forbes at the risks for investors.

Are US investors in China companies intrigued by the China brand and playing ‘pin the tail on the donkey’ in their investment decisions? From where I sit in Shanghai, that’s my general impression. 

For those interested in investing in China companies, I would recommend viewing a company’s reverse-merger history as a potential red flag deserving of further scrutiny of business fundamentals before proceeding. An IPO led by a reputable investment bank may be somewhat less risky. 

Also, bear in mind that the listing standards for the Shanghai exchange are very high – China’s capital markets are still relatively undeveloped and so the CSRC limits listings to companies they deem mature. Consequently, the Chinese companies that are pursuing listings on exchanges outside of China generally are doing so because they can’t qualify to list in China, perhaps in part because they are more volatile/immature. As a result, generally speaking such companies have a higher risk profile. If investors recognize this and allocate their capital accordingly, then they are consciously assuming risk and can plan accordingly.

More in Forbes.

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Amy Sommers is a speaker at the China Speakers Bureau. When you need her at your meeting or conference, do get in touch.
The China Speakers Bureau will be live on air at the American Entrepreneur Radio tonight. Check here for more details. 

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When a China bull becomes a bear - Shaun Rein

Shaun Rein by Fantake via Flickr

Derided as the eternal bull on China, Shaun Rein now warns US investors (and others) in Forbes against a dangerous bubble emerging from China: the IPO hype from anything coming from China, including video hosting companies Youku and Tudou.

A mania about China has gripped too many investors. Anything with China in its name gets hot in the way dot-com got people's blood pulsing in the 1990s. Many of America's biggest-gaining initial public offerings this year have been of Chinese firms. Many of those companies deserve high valuations, but not all of them.

Soon two Chinese online video companies, Tudou and Youku, will be going public. Both are run by intelligent, savvy and aggressive management teams that have raised more than $100 million in private equity money. I have friends involved with both companies who will probably be very angry at me for writing this, so I do not say it lightly, but investors need to be very cautious about investing in these companies and understand the risks.

Shaun Rein has serious misgivings about the business models of both loss making companies who pin their hopes on the 420 million internet users in China.

Searching for profits, both Tudou and Youkou have moved into generating more content rather than relying on user-generated content, and they have clamped down on pirated shows. A Hulu-style site might make money more easily than one with user-created content, but the cost of creating content is huge. Tudou and Youkou are not television stations; Hulu's backers, like Newscorp and ABC, can simply broadcast their television content online. Creating content and developing a cool website take totally different management skills. Content, like the movie business, is a risky bet, because it is dependent on one-hit wonders.

More arguments in Forbes.

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Shaun Rein is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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