Youku.com (YOKU)

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Alibaba To Take Big Stake in Web Video Company Youku

By KEVIN SHALVEY, INVESTOR'S BUSINESS DAILY


Posted 04/28/2014 01:35 PM ET


Alibaba is leading a $1.22 billion investment in Chinese Web-video company Youku Tudou (YOKU) that will give China's e-commerce leader and an equity partner an 18.5% stake.

Alibaba and Yunfeng Capital, a private equity firm founded in 2010 by Alibaba Chairman Jack Ma, will pay the equivalent of $30.50 per U.S.-traded share for about 707 million newly issued Youku shares, according to a Youku press release.

Alibaba's stake will be 16.5% and Yunfeng's 2%.


The deal will give Youku an influx of cash to help it monetize the Web TV series and other programs that it creates, says Tian X. Hou, an analyst at T.H. Capital in Beijing.

"With Alibaba's investment, we believe YOKU can start to monetize on its traffic instead of competing for content purchase or cash," Hou wrote in an email.

But Youku stock, which shot up nearly 6% at the open on news of the deal, quickly reversed sharply. Youku stock was down 8% in early afternoon trading in the stock market today, at an eight-month low near 22.

TheStreet.com says that the decline stemmed from action taken over the weekend by the China government, which ordered that China websites remove several U.S. shows, including "The Big Bang Theory" and "The Good Wife." Censorship has been an issue for some China Internet companies.

Youku's TV dramas are mostly soap-opera-like programs with extended storylines. They had about 25 million average daily views in Q1, according to data from T.H. Capital. Internet users in China watching videos online jumped 83.8% last year to 247 million, according to statistics from the Chinese government.

Alibaba, meanwhile, is preparing what likely will be a huge U.S. initial public offering.

Alibaba has built an operating system for smart TVs, notes Josh Horwitz, a blogger at techinasia.com. The deal with Youku "will likely allow the firm to strengthen its smart TV content in new ways," Horwitz wrote.


Read More At Investor's Business Daily: http://news.investors.com/technology/042814-698659-alibaba-investing-in-web-video-with-youku-tudou.htm#ixzz30Iu5sHGR