September 22, 2018

Tudou Drops After IPO

Shanghai-based Tudou Holdings, China’s second largest video website, saw its value plunge by as much as 19% on its first day of US trading.

Pricing its shares at $29 each, Tudou sold 6 million American Deposit Receipts (ADRs), raising $174 million in the offering, but it opened down at $25.11. By 1pm New York time, Tudou, nicknamed the ‘Chinese YouTube’, was down 8.3%. Tudou sold its stock at a 58% discount to rival video website, Youku. In contrast, Youko had a hugely successful offering when it went public in December, with the best first-day performance for a US listed IPO since 2005. Unfortunately, Tudou’s offering has come at a time when US investors are wary of US-listed Chinese stocks, due to recent accounting scandals and corporate governance issues.

Since it was founded in 2005, Tudou has grown dramatically. Tudou hosts more than 40 million videos, with over 200 million visitors per month. The site serves 40% of China’s monthly online population. As well as movies, tv shows and self-produced content, Todou offers user-generated videos, much like YouTube. The majority of revenue comes from online advertising, but in addition Tudou sells mobile access to China Unicom and China Mobile customers. Although its revenue has increased sharply in the past few years, its losses have also increased. In the three months ending March 31st, net revenue rose 167% to $12.1 million, but the net losses were almost $52 million.

The government-sponsored China Internet Information Center released data claiming that China had 485 million internet users at the end of June. This is quite a contrast to the US, which had 215 million users as of the end of July.

Both Tudou and Youku went public to raise funds for technology changes, expansion, and securing video rights through licensing deals. Talking to Bloomberg, Tudou CEO Gary Wang said: “We have plenty of challenges ahead to make sure we can bring in enough content to meet users’ needs, that the platform is growing rapidly and advertising numbers are also growing rapidly. We want to use the proceeds to grow the company organically.”

In addition to negotiating with US media companies and studios, Tudou is looking for content from providers in China, Japan and Korea amongst others. The Chinese audience craves global variety, and Tudou aims to provide them with just that.

Read more:

Bloomberg Article

Washington Post Article

Chicago Tribune Article

Wikipedia Entry on Tudou

Wikipedia Entry on American Depositary Receipts (ADRs)