Let’s Not Get Excited About the Gaopeng-FTuan Merger, Guys

There’s been an awful lot of discussion recently about the Gaopeng (Groupon)-FTuan merger announced earlier this week. It’s big news! On some Chinese sites, I’ve even seen talk of overseas IPOs and other very rosy predictions. Humbug.

As this site’s resident group buy Grinch, I feel it’s my duty to come rain on this parade. Only I’m not going to use rain, I’m going to use something even more depressing: math. You see, if we look at the market share numbers in China’s group buy space for March (the most recent we’ve seen), we find an independent FTuan in eighth place with 6.3 percent of the market, and an independent Gaopeng in 13th place with 2.5 percent. Both companies had been seeing minor growth in the short term but were down over the long-term, with FTuan having shed three percent of its market share over the last six months, and Groupon losing 1 percent of its share.

So, let’s make a best case scenario and say that neither of them lose anything in the merger and the long term trend of market share loss has stopped. We’re left with a company that controls 8.8 percent of the group buy market. That puts it in fifth place, still behind Meituan, 55tuan, Dianping, and Lashou. Lashou would be in close reach, so if we even assume a little growth since March, maybe Gaopeng-FTuan is now in fourth place.

And it’s a distant fourth place, too. While Lashou has been slipping over the past half year, Meituan, 55tuan, and Dianping have all been growing, and all of them still have a significant lead in market share.

Now, sure, fourth place isn’t too bad. It’s a better position than either of the companies were in before the merger, certainly. But is an IPO really realistic? No. Lashou recently had to cancel its IPO plans for lack of investor interest, and I rather doubt those US investors are going to be any more excited about a company that’s in almost exactly the same place as Lashou is.

Does this mean it’s curtains for FTuan-Gaopeng? Certainly not. But it does mean it’s probably time to cancel those parades. And it’s especially time to stop talking about US IPO plans, because that is just not going to happen.