Companies

China's Internet stocks lose luster

(China.org.cn)
Updated: 2011-05-18 14:23

From boom to bust, China's Internet companies listed on the US stock market have fallen to earth. Shares of Renren, Jiayuan and Netqin dropped below their offering prices just days after shining performances on their first day of trading.

Their slide suggests investors may have lost their taste for China's dot-com stocks. Is it a bubble?

Related readings:  Chinese Internet firms rush for US IPO  Renren IPO pricing delayed until Wednesday: Source  Chinese dating site Jiayuan files for IPO of up to $100m

Taking a look back, most Chinese internet stocks have been touted as the Chinese analogues to Western innovators such as Facebook, MySpace, Groupon and Twitter. In this way, they rebranded their companies to allure American investors. But in reality, their business models are just copies of Western firms.

Ahead of Renren's IPO, some American investor pointed out that the Chinese firm could hardly compare to Facebook in terms of user base and market share. They noted that Renren's offering price was unreasonably high given its financial fundamentals.

A story published in the latest edition of the Economist newspaper also warned American investors of the risk of buying internet stocks, especially those from China, as they face restrictions from Chinese law and policy.

Feng Po, an analyst at China Venture, cited Jianyuan as an example of an overvalued firm.

"The matchmaking Website is in fact small, doesn't have a new business model and lacks innovation," Feng said.

As investor exuberance cools, they have begun to think soberly about Chinese internet stocks and have come to understand what these companies really are, he added.