COO Resignation News Report Spurs Tudou Slump: China Overnight
Tudou Holdings Ltd. (TUDO) tumbled to the lowest level in four months, leading declines in Chinese stocks traded in New York, after a newspaper reported that the chief operating officer of the second-largest video website resigned.
American depositary receipts of Tudou sank for a fifth day, losing 6.6 percent while shares of Youku Inc. (YOKU), which announced in March a plan to acquire the Internet company, tumbled 4.5 percent to the lowest since January. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. was little changed at 88.06 yesterday. Internet data-center operator 21Vianet Group Inc. gained the most in three weeks.
Tudou confirmed the resignation of COO Xiangyun Wang, the China Business News daily said yesterday in a report. Wang is the first senior manager to leave the company after its purchase by Youku was announced, the report said. The acquisition transaction whose value upon announcement was $925 million, is currently valued at $699 million, data compiled by Bloomberg show.
The departure of Tudou’s COO “in the middle of the companies’ integration process caused doubt that there are problems impeding a smooth management transition,” Henry Guo, an analyst at ThinkEquity Partners LLC in San Francisco, said by phone yesterday. The declines reflect “investors’ concern that the acquisition may not be completed.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose for the first time in five days, gaining 0.8 percent to $32.69. The Shanghai Composite Index of mainland stocks rebounded 0.5 percent from a a six- month to 2,175.38. The Standard & Poor’s 500 Index (SPX) was little changed at 1,341.45.
‘Not a Good Sign’
A call and an e-mailed message to Tudou investor relations manager Jeremy Peruski yesterday weren’t immediately returned.
Youku’s American depositary receipts sank 4.5 percent to $18.21, the lowest close since Jan. 10. The shares have have declined 27 percent since the announcement of the acquisition Tudou’s ADRs lost 6.6 percent to $27.41, the lowest level since March 9. Its ADRs have surged 78 percent since March 11.
“The resignation of the COO isn’t as bad as if their CFO resigned, but it’s still not a good sign,” Michael Ding, who helps manage $2.2 billion at U.S. Global Investors, said by phone yesterday from San Antonio, Texas. “Even before this news, there were questions about how the merger will improve competitiveness. There’s a lot of competition in video. They’ve both spent a lot of money already, and it’s not clear how they can ever turn a profit.”
AsiaInfo-Linkage Inc. (ASIA), which sells telecommunication software to China’s biggest wireless carriers, sank 3.6 percent to $11.92, the biggest decline since June 20.
The Beijing-based company said it will report second- quarter financial results on July 30 after U.S. trading closes. The company will probably report a 78 percent decline in the quarter to $7.2 million, according to the average estimate of six analysts surveyed by Bloomberg.
China Petroleum and Chemical Corp., Asia’s largest refiner also known as Sinopec, rebounded from the lowest level since September 2010 as BOCOM International recommended buying the shares of Asia’s largest refiner.
The ADRs of Beijing-based Sinopec advanced 3.1 percent to $85.26 in New York yesterday, trading at a 0.9 percent premium above its Hong Kong stock. Each ADR represents 100 underlying shares of Sinopec.
Sinopec was raised to buy from long-term buy at BOCOM by equity analyst Fei Wu. BOCOM’s 12-month target price is HK$8 ($1) per share.
Lower Fuel Prices
China, the world’s second-biggest oil consumer, reduced fuel prices for the third time since May yesterday, easing costs for factories and motorists while threatening profit margins at refiners.
China may seek ways to “promote a reasonable growth in investment,” Premier Wen Jiabao said in a statement posted on a government website yesterday. Economists expect the government to report tomorrow that second-quarter gross domestic product expanded at the slowest pace in three years. Passenger-vehicle sales in the world’s second-largest economy rose in June, exceeding analysts’ estimates for a fourth consecutive month.
“The Chinese recognize that growth is slow, but unlike in the U.S., there’s a lot they can do both through monetary and fiscal measures to stimulate their economy,” Joseph Tanious, a strategist at JPMorgan Funds, who helps oversee $394 billion, said by phone from New York yesterday. “Once we get a little more clarity on growth, you’re likely to see multiples expand and stock prices move up.”
21Vianet jumped 4.5 percent, the most since June 15, to $11.52.
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