China & # 039; s Tech Investment Mania Ebbs - For now
China & # 039; s Tech Investment Mania Ebbs - For now
The tide is suddenly turning against some of China's most valuable technology companies.
After months of rises in valuations among dozens of private companies in the world's most populous nation, investors are wary of companies that are rapidly consuming cash or have difficulty in their growth strategies.
In recent weeks, several unicorns of Chinese technology, private companies valued at more than one billion dollars, have struggled to meet the objectives of fundraising, according to bankers and investors. Some have delayed initial public offering plans, while some investors have reduced their estimates of the value of one of China's top emerging companies.
"Pessimism is spreading," said Shen Meng, director of Chanson & Co., a Beijing-based investment bank. The sharp declines in the shares of China's leading Chinese technology companies and recently listed are also stoking investors 'skepticism towards unicorns' valuations, he added.
This could prove to be a problem, say some bankers and industry participants, and many investors continue to rely on the long-term growth and profit potential of China's Internet sector.
However, private equity firm Warburg Pincus LLC recently withdrew from a capital increase by a Chinese real estate broker that has positioned itself as a technology and Internet game, according to people familiar with the matter.
Warburg had been in talks to invest $ 500 million in Homelink Real Estate Agency Co., also known as Lianjia. The company intended to raise a total of $ 2 billion at a company valuation of $ 13 billion, including $ 1 billion of the Chinese giant of social networks
Tencent Holdings
Limited.
, The Wall Street Journal reported earlier.
Lianjia operates brick and cement branches in Beijing and other cities, and has invested in applications and websites that millions of Chinese people use to find rental and investment properties. Warburg decided that the valuation that Lianjia was looking for was too rich, even after the company offered to raise funds at a significantly lower price, said one person familiar with the matter.
Meanwhile, some investors are hurting Didi Chuxing Technology Co., the dominant company in China that overcame its rival Uber Technologies Inc. in the country several years ago.
Some Didi shares recently changed hands in private transactions at prices that implied a company valuation of $ 50 billion to $ 52 billion, according to people familiar with the matter. That reflects a decrease in the value of Didi since the end of 2017, when raised $ 4 billion of investors including Japan
SoftBank Group
Corp.
in a valuation of $ 56 billion.
Some mutual funds reduced the value of their holdings in Didi in recent months, according to regulatory documents. A risk fund managed by Davis Advisors LP this past summer saw its stock price decline by about 7% compared to its brands earlier this year, according to fund reports. The fund, which is based on large paper profits from its initial investment, had around $ 321.8 million in Didi shares at the end of July. They were marked at $ 345.1 million on January 31.
Since May, two women have been killed in China by Didi drivers, which provoked a public reaction against the company. Didi suspended one of his services and promised to implement more security measures and verify the identities of the drivers. It is expected that the growth of the company's revenues will slow down as a result, affecting its value, according to some market participants.
Didi, who has gone through several rounds of financing, raised another $ 500 million in July from
Reservation tenders
Inc.,
The travel company formerly known as Priceline. Didi this year considered acceleration plans for an initial public offering in a valuation that could rival that of Uber, but now it is unlikely that the Chinese company will go public. Uber could go public next year with a much higher valuation.
Some Chinese technology IPOs have been postponed due to weakness in the stock price of many Chinese technology and internet publicly traded companies this year. Tencent and
Alibaba Holding Group
Limited.
They have been reduced by 36% and 17% this year respectively. The actions of the smartphone manufacturer
Xiaomi
Corp.
and internet service company.
they have plummeted since they went public in the last months after the sale of multi-million dollar shares.
Tencent Music Entertainment Group postponed recently An IPO of 2,000 million dollars until November, at least, due to turbulence in the global market, the newspaper reported previously.
However, investors and bankers say that there is still money from China's technological moves. Valuations continue to rise, even if some companies are not achieving their fundraising goals.
Lufax, one of China's largest online lenders, has been looking to raise up to $ 2 billion from private investors in a company valuation of $ 38 billion, according to people familiar with the subject.
The transaction has been delayed and it is likely that Lufax will not increase the total amount, said people familiar with the matter. Investors raised doubts about the company's position in light of new Chinese regulations governing online lenders, some of the people said.
A minor agreement would still considerably increase the valuation of Lufax, whose formal name is Shanghai Lujiazui International Financial Asset Exchange Co. The company is backed by the Chinese financial giant
(Group) Co. and was last valued at $ 18.5 billion in a round of fund raising capital in 2016.
Meanwhile, investors are still lining up to buy stakes in certain Chinese companies. Bytedance Ltd., a Beijing company that operates the popular news aggregation application Jinri Toutiao and the TikTok video platform, has attracted significant demand from investors for a capital increase of $ 3 billion, according to people familiar with the agreement. .
SoftBank,
& Co. and General Atlantic are participating in the fundraising of Bytedance, which I would value the company in more than $ 75 billion, an abrupt increase of around $ 30 billion at the end of 2017, the newspaper reported previously. Bytedance is one of the fastest growing new companies in China, with hundreds of millions of people in China and the United States who have downloaded their mobile applications.
A positive aspect for investors is that many technological unicorns have less arrogance compared to a few months ago. For example, some new companies that had previously refused to share financial information with potential investors, believing that they did not need to open their books to obtain financing, have begun to offer more details, say investors and bankers.
"It's an investor market instead of a new business market now," said Herry Han, co-founder of Lightspeed China Partners, which invests in early-stage Chinese technology companies.
.
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