The investment climate might be bearish, 360buy – China’s Amazon – is still making a loss, but picked up a US$ 300 million round of capital and saw its value skyrocket. Reuters’ Breaking News analyst Wei tells why this might go wrong for the company and its investors.
The Amazon of China defied the down-round blues. With a new investment round unveiled last week, e-commerce upstart 360buy.com, aka Jingdong Mall, saw its valuation swell by 15 percent in a year. Despite widening losses, venture capital continues to pour money into China’s crowded e-commerce space. But as players feverishly compete for market share by discounting, profits look ever more elusive.
After snagging another $300 million from Tiger Global and Ontario Teachers Retirement Fund, 360buy is now valued at some $7.6 billion. That’s up from $6.6 billion a year ago, when Digital Sky Technologies, Sequoia Capital, Tiger and the family controlling Wal-Mart injected capital, despite speculation among VCs in China that Jingdong would struggle to raise money at a higher value.
Trouble is, more money is likely to lead to more promotions. Heated competition and widespread discounting by new entrants pushed early comers, such as Dangdang (DANG.N), into the red. Analysts don’t expect the online bookseller to turn a profit until 2015. Jingdong’s loss is expected to widen in 2012 to $300 million as it strives to triple its sales and catch up with Alibaba’s Tmall. Online clothier Vancl’s goal to become profitable in the fourth quarter still looks a tall order.
This week, on November 22, the China Weekly Hangout is about the future of nuclear power in China. You can register at our event page here. (Two weeks earlier we missed the change in daylight saving time in the US and had to cancel.) First part will focus on the resumption of building nuclear power stations, the second part of the chances NIMBY protests can derail this ambitious program. Planned participants: Richard Brubaker and Chris Brown.
You can access all editions here.