Youku and Dangdang have gone public in the U.S. Youku's IPO price was $12.8, closing at $33.44, up 161%. Dangdang's IPO price was $16, closing at $29.91 with online customer service, up 87%. On the first day of listing, the increase was gratifying. I imagine Mecox Lane is quite conflicted at this moment. Dangdang's move seems to be sending a message to Mecox Lane: if you want to do B2C e-commerce, you should be behind me. Wanting to be the leader? You're too inexperienced! Regardless of how it turns out, let's celebrate Youku and Dangdang first! But in the face of another wave of listings triggered by this move, I would like to share some personal thoughts. Although Youku and Dangdang have both gone public, they still face continuous pressure and challenges. For Youku, its revenue growth has been encouraging compared to before, but the site currently has not yet made any profit. How to establish an effective profit model still needs further exploration. Fake HD has always been Youku's flaw. Now, through going public, obtaining more market funds, we hope that these funds can be effectively used to solve the video HD problem. Youku's listing, to a certain extent, allows the capital market to confirm the development and improvement of the video industry, but the chaotic situation in this industry has not stopped, market competition remains fierce, and industry development still needs standardization. Currently, Storm Media Player has also prepared for listing, which exerts considerable pressure on Youku. As for Dangdang's listing, it could be said to be very timely. On one hand, after more than ten years of accumulation, from logistics to supply chain, everything has developed relatively maturely. On the other hand, facing Mecox Lane's listing, Dangdang has also given its own response. However, Dangdang should be aware of the stock market turmoil surrounding Mecox Lane. On the day of its listing, Mecox Lane, as the first B2C stock, was widely favored. But the subsequent turmoil caused it to suffer heavy losses in the stock market. Therefore, Dangdang still needs effort, continuously building up its foundation in B2C e-commerce, and avoiding repeating Mecox Lane's turmoil. The pressure on Dangdang.com remains significant.
Mecox Lane's sharp drop in stock price upon listing raises warning bells. On December 1st, Mecox Lane's stock price sharply dropped, breaking below the issue price, greatly surprising investors. The next day, Mecox Lane CEO Gu Beichun stated: "The company's operations are entirely normal, with no changes. Capital markets and operations are two different things." Clearly, capital markets and operations are indeed two different things, and whether or not the company is well-prepared for listing is crucial. Although Mecox Lane encountered stock market turmoil, Gu Beichun did not take it lightly: "As business operators, we will look past the recent stock performance and focus on the long-term development of the enterprise." We hope Mecox Lane can develop well. However, was Mecox Lane excessively packaged before listing? Was it merely taking advantage of the best listing opportunity? These questions remain unresolved. Only Mecox Lane knows. As an outsider, we can only wait and see over time. Mecox Lane's stock market turmoil should serve as a warning bell for other companies considering going public, such as Youku, Dangdang, and other domestic internet companies intending to list. They need to weigh their current situation and strength, and not go public just for the sake of going public.
Why do companies go public? In light of this wave of listings, we cannot help but ask, why do companies go public? Nowadays, more and more companies are planning their listing strategies, rushing to put listings on the agenda. Of course, going public brings enormous wealth to shareholders, increases company value, lowers company funding costs, and increases opportunities for market expansion. However, going public requires companies to have sufficient understanding of the capital market, knowledge of company capital structure, and awareness of how financial systems impact company value. Additionally, the state of the stock market's development, how companies engage in capital operations, etc., are all issues that need to be resolved. It is well-known that Dangdang is a famous "husband-and-wife store," with the couple having strong control desires. Now that Dangdang has gone public, whether the couple can handle Dangdang post-listing remains uncertain. Many people believe that "IPOs can bring a popular effect where the company is highly favored by the public," but popularity does not necessarily equate to profit growth. Despite Dangdang achieving $16 million in profits in the first nine months of 2010, a significant increase from the same period last year, what kind of development Dangdang will experience next still awaits market testing. Facing this wave of listings, we should consider why companies choose to go public.
Must good companies necessarily go public? I would say, "Must good companies necessarily go public?" Not necessarily. There's no denying that going public can make a company more public, market-oriented, and socialized, allowing it to absorb large amounts of capital for development and further expansion. But thinking about it from another angle, going public means selling the company, selling its future. If a company needs substantial capital to promote further development and has such a need, then going public is a pretty good way. However, if you don't know how to use the money after getting it, then why go public? If your company is currently developing in an orderly and healthy manner, following market rules and steadily growing, then why pursue going public?
Of course, it's not to say that going public represents unstable company development. Not going public doesn't necessarily mean the company is struggling, and going public doesn't necessarily mean the company is doing well.
Blindly pursuing going public is unwise. Renowned economist Lang Xianping stated, "The inexplicable pursuit and reverence for going public is a tragedy for a nation." "A listed company is impatient and doesn't think about constant improvement." Sina CEO Zhang Chaoyang believes: Going public in the U.S. is a collective sorrow for China's internet industry. To follow the investor's baton, these companies are busy with revenue, watching stock prices, often neglecting long-term benefits and missing many opportunities, while also ignoring the real needs of users. A simple example: Shenzhen Wandelei Communication Technology Co., Ltd., everyone should remember this former "cordless phone king." The company was once a key high-tech company under the national Torch Program and one of the first companies recommended by Shenzhen to the CSRC to apply for listing on the Growth Enterprise Market. However, precisely such a company went bankrupt quietly before the opening of the SME board. Wandelei's mistake was disregarding everything for the sake of listing, blindly pursuing listing, disrupting the company's long-term development plan, and severely violating corporate development rules.
China's internet industry has already experienced three waves of listings. Today, Youku and Dangdang's listings will trigger a new wave of listings. In the coming period, more internet companies will go public in the U.S. Here, I only hope that those companies preparing for listing will not blindly follow trends and not go public just for the sake of going public.
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