Tudou is Running Out of Money

A Sina Tech report this morning suggests that Tudou, one of China’s largest internet video sites, is facing dire financial straits. According to the company’s recently released Q2 financial reports, it has about $20 million US in available cash, but its expenses for Q2 of this year were over $26 million US. As Tudou isn’t currently profitable, this means that without the cash injection it would receive from an IPO, it would probably be unable to sustain all of its operations within less than half a year.

Of course, Tudou is planning an IPO, and perhaps because of their financial situation, they recently upped the amount they’re seeking to $180 million US.

Still, Tudou is in a tough spot. Its road to IPO has been far from smooth, and the current environment overseas is so unwelcoming that many Chinese companies originally planning to IPO this year have shelved their plans and elected to wait until investors are feeling more friendly. Tudou, it seems, does not have that option; they will have to put together a successful IPO, and soon.

Of course, an IPO at the moment — Tudou’s most recent plan was to IPO on August 17 — could also be dangerous given that the US markets are especially rough after the nation’s credit crisis and subsequent rating downgrade. Youku, Tudou’s chief rival in China’s internet video market, has seen its stock fall dramatically. Many are questioning how much Tudou would be able to raise in the current market.

If Tudou does not or cannot IPO, the next question is whether or not Youku would buy it. Such a move would give Youku dominance of the video market, and the company probably has the money to do it. However, if Tudou runs out of money without being acquired, Youku stands to gain a significant percentage of its market share without spending a dime. Victor Koo, the company’s CEO, told Sina Tech that he “always keeps an open mind” when asked whether or not his company was considering buying Tudou.

Other companies might stand to gain more from acquiring Tudou and its percentage of the internet video market. Baidu could merge the company with its own Qiyi video service to gain some traction, and according to Sina, industry insiders are suggesting that Sohu and Tencent might also be interested.

We’ll keep you up to date as Tudou approaches its IPO. We have also reached out to Tudou for comment and will update this story should we receive a response.