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Tudou offering could shore up No 2 ranking

(China Daily)

09:48, August 05, 2011

Tudou Holdings Ltd, which is clinging to second place in China's online video market, could shore up its position in the sector with funds raised from a pending initial public offering (IPO), analysts said.

Tudou is seeking to raise up to $180 million in an IPO on the Nasdaq, it said in a filing to the US Securities and Exchange Commission (SEC) on Wednesday.

That would be 50 percent more than stated in its initial SEC filing in November. The IPO was delayed by a dispute between the company's founder, Gary Wang, and his ex-wife.

Tudou didn't state an IPO date in the latest filing, but it plans to make its Nasdaq debut this week, according to International Financing Review, a Thomson Reuters publication.

Sun Jin, a public relations manager at Tudou, declined to comment. Tang Yizhi, an analyst with domestic research company Analysys International, said that Tudou's second place in the market was in danger, and the IPO funding might ease the pressure a bit.

Tudou has raised $135 million in five rounds of fund-raising, but it lost 500.73 million yuan ($77.75 million) from 2008 to the first quarter of this year. The fund-raising move comes amid cutthroat competition among major online video companies in the world's largest Internet market.

Online video companies need large amounts of capital, especially for copyright fees and bandwidth costs, though many - such as Tudou -haven't broken even. Many of them have tried different avenues of raising funds. Youku.com Inc raised $826 million through its IPO last year and a follow-on offering in May.

Latecomers to the market, such as Qiyi.com Inc and TV.Sohu.com, have search engine Baidu Inc and web portal Sohu.com Inc, respectively, to fall back on.

"In terms of funding, of course Youku was able to gain an advantage both in its IPO and also in its secondary offering, so raising capital for Tudou - even at lower valuations than late last year - would help the company press home its advantages over others in the field," said Duncan Clark, president of Beijing-based research firm BDA China.

In the first quarter, Youku had the largest market share in terms of revenue, at 22.4 percent, followed by Tudou with 16.8 percent and Sohu at 13.6 percent, according to Analysys International.

A wave of Chinese Internet companies went public in the US earlier this year and were favored by many investors. However, enthusiasm for Chinese 'concept stocks' has cooled because of accounting controversies at several companies.

As to whether the Tudou and subsequent Chinese IPOs could expect a favorable US investor reception, Clark said: "There could of course be a further sell-off in the near term.

"But once investors adjust to the possibility of a 'double dip' in the US, my gut feeling is China and other emerging markets become more attractive by contrast."

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