Tudou Relaunch IPO to compete with Youku

Recently, after the suspension of IPO process causing from the divorce lawsuit of its CEO, Tudou resubmitted its prospectus to American Securities and Exchange Commission. Insiders analyzed that if everything goes well, Tudou will go public in May. As China’s video sites frequently go public presently, the listing of Tudou may probably impact the share price of other video sites such as Youku, said an analyst, in addition, the increase of listed video companies will put a huge pressure on those not yet been listed. It may even lead to a shakeout, and reshape the video industry.

Tudou.com first submitted its IPO application on Nov 8, 2010. But influenced by its CEO Gary Wang’s divorce issues as well as copyright lawsuits, its IPO process has to be suspended. According to some insiders, the actual reason of suspension is that the calculation applied by Tudou before did not fit American regulations, and the new prospectus has been corrected. They predict Tudou be listed in May.

The resubmit showed that Tudou may have already cleared obstacles appearing in the way of IPO before, analyst said. Journalist has contacted Tudou for comment, but was declined. Analysts believe that since it is the second time to apply IPO, Tudou must have certain preparation, but the listing process will always be filled with interference in all terms. It still has the probability to meet with new troubles in future.

To Tudou, its main rival currently is none other than Youku. They have submitted their prospectuses almost at the same time last year, but now Tudou was left far behind. During these times, Tudou has been kept in dilemma. The increase of price and brand fame of Youku compressed the space leaving to Tudou. On the other hand, because of the setback of listing, Tudou finds it hard to compete with its archrival in terms of capital before new round of investment arrives, which lead to some loss of faith for Tudou from externals.

Regarding Tudou’s resubmit for IPO, Youku declined to comment.

As China’s video sites frequently go public presently, the listing of Tudou may probably impact the share price of other video sites such as Youku, said an analyst, in addition, the increase of listed video companies will put a huge pressure on those not yet been listed. It may even lead to a shakeout, and reshape the video industry.

Tudou’s IPO will bring some unfavorable effect to Youku, the analyst Jia Jinghua told journalist, the listing of Tudou will bring positive effect to video industry, but will negatively influenced the price of Youku shares. In the aspect of performance, the profitability of Tudou is slightly higher than Youku, which could be seen through comparison of the two prospectuses.

By comparison, Youku’s operational profit is higher than Tudou, but profitability a bit lower. Take the continual operation index—operating margin as example, Youku.com was left far behind by Tudou in 2007, with two years surpassing in 2008 and 2009, it was again fell behind in the first 9 months of 2010.

Though Youku got some advantages from listing, its rival’s listing will probably bring negative effect, which could be witnessed directly from the price of shares, as some one analyzed.

However, insiders disclosed that most of capitals collected from listing by Tudou and Youku will be used for their copyright procurement, and content and copyright will still be headache-causing issues for online video sector. Charles Zhang, CEO of Sohu once expressed, “The large amount of content procurements by so many video companies through listing or financing bid up the price of content, and increased the cost.” “There are bubbles in copyright in video sectors. The soaring price for copyright of movies and television plays resulted not only from fighting with piracy or intense competition among video websites, but also from capital market of Wall Street. With the boom of financing at earlier stage, some well-fixed video producers enlarged their copyright procurement, which to some extend, help raise the internet copyright price.”

As for profitability, Charles said frankly, “Intense competition axed advantages for video sites in bargain with content producers. And bubbles urged them to finance more to compete with others. In a market environment of violent competition, short-term profit seems impossible.”

However, IT analyst Chen Yongdong pointed out, Charles Zhang’s advocacy of bubble policy may have something to do with its violent competition Sohu are facing in video sector. But the appearing bubbles in China’s internet industry could not be denied. In the field of online video industry, no matter it is a listed company like Youku, or a company listed in disguise like Ku6, or a company about to or willing to go public like Tudou and Sohu, it is trying hard to seek for profit.

Analyst Jia Jinghua told journalist that after the listing of Tudou, there will be several public companies in China’s video sector namely Youku, Tudou, LeTV, and Ku6. Depending on the strong financial strength, they will exert great pressure on the companies that hasn’t been listed, and even reshape the whole video industry.

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