Wednesday Tech Briefing: NXP, Jack Ma, Tencent
1. Ride-Hailing Firms Face Greater Local Scrutiny Amid Crackdowns Following Murders
What: The central government has said it will heighten scrutiny of the ride-hailing industry through year-end and will require ride-hailing companies to roll out a series of measures to guarantee the safety of passengers, including stricter background checks for drivers and creating systems that are “more responsive to users.”
Why it’s important: The move follows the murders of two Didi Chuxing passengers. Regulators face pressure from critics who say that a lack of government oversight allowed the industry to put market expansion above customer safety.
Big picture: Didi has become China’s largest ride-hailing platform, with a market share of over 90%. Its only major former competitor, Uber, sold its China operations to Didi in 2016. (Source: Caixin)
BIG TECH COMPANIES
2. Dutch Chip Maker NXP Moves Past Failed Qualcomm Merger, Eyes Chinese Market
What: “NXP Semiconductors, moving beyond the failed US$44 billion purchase by its US counterpart Qualcomm, is highlighting China as a key source of future growth,” the South China Morning Post reported. Tariffs from the ongoing U.S.-China trade conflict “aren’t expected to make a dent on the NXP.”
Why it’s important: “The company was in the spotlight for more than two years after Qualcomm announced its acquisition bid. The transaction, which would have been the biggest takeover in the chip industry, ended after 21 months when China’s antitrust regulators failed to act by the deal’s deadline.”
Big picture: “A major element of NXP’s business is computer chips for carmakers, accounting for about half of its total revenue in the second quarter, and executives said China was its largest automotive market.” (Source: SCMP)
3. Alibaba’s Partnership Structure Keeps Jack Ma in the Picture Beyond 2019
What: Alibaba founder Jack Ma will continue to have a say in the company’s matters even after his retirement next year, thanks to Alibaba’s partnership structure.
Unlike traditional dual-class ownership structures that concentrate a high proportion of voting shares in the hands of a few founders, the Alibaba’s partnership system awards such rights to a large group of management partners. It is meant to enable senior managers to collaborate and override bureaucracy and hierarchy, according to the company website.
Why it’s important: Ma recently said he will retire as chairman next year. But some doubt his larger-than-life presence will ever be completely gone from the company that he founded in 1999.
“Jack Ma’s significance to Alibaba has long surpassed his position. How could the new chairman not listen to him?” one staffer at a major global hedge fund told Caixin. (Source: Caixin)
4. Tencent Buys Back Shares for Three Days Straight
What: Tencent bought back its own Hong Kong-listed shares for three trading days in a row starting Friday, in its first buyback since 2014. The company’s stock was up 0.32% as of 10 a.m. Wednesday, Hong Kong time.
Why it’s important: The buyback comes after Tencent shares lost about a third of their value since their mid-January peak. The company has come under pressure amid a government crackdown on online gaming, which is Tencent’s largest source of revenue. (Source: Company filing)
5. Alibaba Partners With Russian Firms on E-commerce Platform That Will Use Moscow's Own Payment System
What: “Chinese e-commerce giant Alibaba signed a new strategic partnership with a number of Russian firms Tuesday, which will form a new e-commerce platform and utilize Russia's own payments system,” CNBC reported.
Why it’s important: “The idea is to create a one-stop destination for consumers to communicate, socialize, shop and play games, all within the same online ecosystem.” At the same time, the deal, which will see Alibaba give up control of its Russian business in order to form a partnership, could give the company greater access to the Russian market. (Source: CNBC)
6. Alibaba-Led Group Creates New Twist in Clinic Chain’s Privatization Saga
What: A consortium that includes Alibaba and Yunfeng Capital is reconsidering its plan to privatize Nasdaq-listed clinic operator iKang, one of China’s largest private clinic networks. The deal was inked in March to take over the company for $20.60 per American depositary share (ADS), while the consortium said on Friday it is “re-evaluating the commercial viability” of the deal.
Why it’s important: iKang is one of China’s largest private clinic networks, offering medical checkups at 115 medical centers in 33 cities. Its coverage extends to more than 200 cities through agreements with third-party facilities.
Big picture: Efforts to privatize iKang began in 2015, a year after the company listed on Nasdaq. A consortium led by iKang founder and CEO Zhang Ligang pledged $17.80 per ADS to privatize the firm. If the current deal collapses, iKang might have trouble securing a new purchaser to repay a loan of 850 million yuan ($123.9 million) that is due in December. The company admitted that it currently doesn’t have sufficient cash to cover the loan. (Source: Caixin)
Compiled by Qian Tong and Hou Qijiang
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