Tuesday, January 18, 2011

Whatever Happened to Tudou?

By Eric Jackson
RealMoney Contributor

1/14/2011 7:49 AM EST
Click here for more stories by Eric Jackson

Whatever happened to Tudou? The "YouTube of China" filed an initial public offering (IPO) and applied to trade on the Nasdaq under the symbol TUDO in the U.S. in early November. This was a week before its rival Youku (YOKU - commentary - Trade Now) did. Yet, we haven't heard from Tudou since. What's going on?

Initially, when both Tudou and Youku filed their prospectuses to do an IPO, many Western investors were wondering if Tudou wouldn't be the more successful of the two issues. Even though Tudou is No. 2 to Youku in market share currently, its reported numbers reveal that, unlike Youku, Tudou has been profitable in 2010. Tudou's offering will be led by Credit Suisse, which is very widely respected for its tech deals in China (although Youku was able to nab Goldman Sachs as its lead underwriter).

And even though Tudou was No. 2 in the market, it was close enough to Youku that many investors thought it was basically a dead heat between the two currently (different numbers have been bandied about, but it basically looks like Youku has 20% of the market while Tudou has 16%).

Few observers expected the type of successful IPO Youku received when it finally went public in December. The stock was immediately a hit and tripled its offer price. Critics quickly sputtered that investors were being irrational. One person called it the most overvalued stock in the universe.

While Youku has been highly volatile for the last month since its IPO, the price has held up - the stock is currently trading in the midrange of its public trading price (since its IPO). Partly, it has been supported by the recent news that Youku has struck a deal to stream the Hollywood movie Inception over its service to subscribers. This deal fed into some observers who have said that both Tudou and Youku are more likely to become the future "Netflix (NFLX - commentary - Trade Now) of China" rather than another YouTube. With Netflix moving to focus more on streaming movies to its customers rather than mailing DVDs, you can see how the Inception deal would get people excited.


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