Sina Spin-off, CRIC, Rivals Its “Parent” in Market Value; More Verticals to Get Spun-off in IPOs

The following is my most recent post at Digital East Asia.

On Oct 16th China Real Estate Information Corporation (NASDAQ: CRIC), a joint venture between Chinese portal Sina Corporation ((USA) NASDAQ: SINA) and realty agency E-House (China) Holdings Ltd.(NYSE: EJ), IPO’d on the NASDAQ and jumped 18% on its first day of trading. The stock, whose IPO price is $12, had a run of up to $17 last week, but is now more modestly priced at $14. That gives CRIC a market cap of US$1.96B, just US$300MM shy of Sina’s current market cap of US$2.24B. Sina owns 33.35% of CRIC (E-House owns 50.04%).

The IPO is an indication of the new ambitions of Chinese Internet portals, and also fits with the general strategy outlined by Sina management after their failed merger with Focus Media Holding Limited ((ADR) NASDAQ: FMCN) . This IPO is the third spin-off IPO of a major Chinese Internet player, after Inc. (NASDAQ: SOHU) spun-off Limited (NASDAQ: CYOU) and Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) spun-off Shanda Games Limtied (NASDAQ: GAME).

CRIC is not the industry leader in the real estate vertical space in China. That honor belongs toSoufun (which literally means “house search”). Sohu’s Focus is second in market share, while Sina’s vertical (now injected into CRIC) is third. After the CRIC IPO, Soufun seems to be stepping up the pace of its own IPO plans. In an interview with (link in Chinese), Soufun CEO Tianquan Mo expressed that “major announcements will be made soon.” Earlier in June he had expressed that Soufun is considering an IPO in 2010.

Meanwhile, Zeng Fuhu, a VP at Sohu Focus comments (rather skeptically):

“Just like was the first portal to IPO, while you get some first mover advantage, being the first to IPO doesn’t affect the competitive landscape.

Spin-offs aren’t the only way an Internet company can grow. Compared to western counterparts, Chinese companies seem to see this as an effective way to incentivize employees, but it’s not right to over-emphasize spin-offs… Most US Internet companies like Yahoo and Google have never done spin-offs.”
– Zeng Fuhu, Vice President, Sohu Focus Network

While Mr. Fuhu’s remarks sound rational, the wave of spin-offs and vertical portals seeking IPOs appears to be just beginning. It may not be too soon before Sohu also considers spinning off Focus.


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