Number of China based US IPO just completed two deals in 2012; one is luxury e-commerce site Vipshop and the other is social music/entertainment platform YY.

Bleak IPO prospect ahead for China internet business

In 2012, Chinese IPO activities in US declined 83% from 2011 and 95% from 2010, due to breakout of fraud in 2011 along with SEC investigations of Chinese auditors, and economic slowdown in China, according to Renaissance Capital. Of course these are just part of the reasons.

In the past, the most promising sector of going IPO was the internet business. Now this landscape has evolved so rapidly that I barely can recognize. Most words I heard in the public domain these days are:

“Consolidation”: internet big boys like Baidu, Tencent are acquiring small, innovative startups

“Frugality”: Investors are cautious of spraying money around, especially in China e-commerce.

“Shakeout”: Now comes the time to continuously weed out unfit startups.  Many founders suddenly discovered that they are unable to raise more cash at a higher valuation than the previous round.

Some said certain startup business launched in China over the boom years of 2004-2008 might go public soon. Um…like much anticipated and mystified “360buy IPO”…sometimes I almost felt that “the barking dog never bites”. Personal view 2013 is still not a good timing for 360buy.

And I do not reckon that China internet IPOs will be completed a lot in 2013. Anyhow we might need to watch out those quiet ones (recall the sudden IPO news of YY). Sexy concepts like “O2O”, “mobile social” are still much indulged by heaps of entrepreneurs, but the road to IPO seems no longer that feasible. M&A exit is even long and hard. Tough life ahead. 

By Cécilia Wu
English & Chinese Editorial Manager