360Buy, China’s second-biggest B2C e-commerce site, is said to be preparing for its American IPO right now, with a view to listing in September. The business news website ChinaVenture recently reported rumors of 360Buy executives holding a lengthy meeting with analysts, and that a resultant SEC filing could be coming this month.
But, after a year of turmoil for Chinese tech stocks, and right after the controversially over-inflated Facebook (NASDAQ:FB) listing, the highly contentious issue of of what 360Buy is worth will come to the fore. If we think back to March of last year when Russian investment group DST committed hundreds of millions of dollars to the Chinese online shopping website, that effectively valued 360Buy – or Jingdong Mall, to translate its Chinese name – at US$10 billion.
That huge figure syncs up nicely with a calculation of 360Buy’s worth according to Amazon’s price-to-sales ratio of 1.18 based on 360Buy’s sales estimate of $11 billion for 2013. Trouble is, Amazon – which 360Buy resembled strongly in its initial stages – is a much more mature company in a more stable (and, I’d dare to say, less fiercely competitive) American market. Plus, Amazon is pulling in profits, while 360Buy is still bleeding 5 percent operating losses.
So, tweaking that ratio to a more reasonable 0.5 would value 360Buy at $6 to $7 billion. Some would say that’s still too high. The last time the rumor mill whirred into life for 360Buy, it was being valued at way over $10 billion, with talk of raising as much as $5 billion. Surely the recent blunders and mis-steps among Chinese tech IPOs – and with Greece and Spain staring into the kind of financial abyss that could drag down global markets – will curtail such excess this time round.
Timing remains crucial. In the past, 360Buy’s founder and CEO, Liu Qiang-dong, has talked publicly of 2013 as making sense for a public offering for his company. Throughout 2012, it looks to be busy hiring 25,00 new staffers; by 2016, he wants the e-commerce site to have usurped Alibaba’s Tmall as the market leader. Somewhere in the middle, the time has to be right. Making this happen in September – rather than waiting for 2013 – might come down to a bunch of odd factors. These include avoiding the market upheaval during an American election period (November this year), getting in before a hyped re-appearance of a Game of Thrones-esque “winter” of investment freezes, a fast-changing e-commerce landscape in China, and pre-empting a downturn if the Chinese economy really does hit the kind of “hard landing” that some economists are predicting.
Until 360Buy’s IPO roadshow creaks into life, estimations of its valuation will vary wildly, which in itself speaks a lot about economic conditions.