Chinese web firms delete more than 60,000 accounts as new rules loom

Wall Street Journal: (by Josh Chin)

Chinese Internet companies have deleted tens of thousands of user accounts as the country prepares to enforce new registration rules that will further cement government control over online discourse.

A total of more than 60,000 accounts across a number of Chinese Internet platforms were deleted in recent days, chiefly because of misleading or harmful usernames, the Cyberspace Administration of China said in a statement dated Thursday. Among them were accounts that masqueraded as government departments, carried commercial names such as “Come Shoot Guns” and “Buy License Plates,” spread terrorist information or sported erotic avatars.

Unverified accounts falsely claiming to represent state media were also shut down, the agency said, adding that it covered everything from microblogs to chat accounts to online discussion forums. Companies listed as having taken part in the cleanup included top U.S.-listed Chinese tech giants Alibaba Group Holding Ltd. , Tencent Holdings Ltd. , SinaCorp. and Baidu Inc.

The comprehensive creation of a clear and bright Internet space requires active and positive conduct from enterprises,” the regulator’s statement said.

The new rules aim to further tame the country’s already tightly controlled Internet by prohibiting the use of deceitful or harmful identities and requiring Internet users to submit genuine personal information when registering for online services. They were announced earlier this month and go into effect March 1.

China has attempted to implement similar limits in the past, with mixed success. The current effort, however, arrives at a time of intense ideological and political tightening as Chinese President Xi Jinping moves to reassert Communist party dominance over public discourse, particularly online.

Venture capitalist and Chinese blogging pioneer Isaac Mao warned that requiring users to register with their personal information to use any Internet service would stifle expression and creativity online.

It definitely has a chilling effect,” Mr. Mao said. “In the long run, freedom of speech and freedom of innovation will be dramatically harmed.

Weibo Corp. ’s microblogging service deleted 5,500 accounts, according to the regulator’s statement. They included accounts that spread information related to the East Turkestan Islamic Movement, a separatist group from the northwestern region of Xinjiang.

Tencent canceled instant messaging and other social media accounts related to gambling, firearms, fake invoices and fake food-safety information, the regulator said.

Neither company immediately responded to requests for comment.

Some analysts have warned that the new rules could make things challenging for Chinese Internet companies by increasing operational costs while reducing total user numbers.

Yet tighter registration might also improve the quality of their users, said Xiaofeng Wang, a senior analyst at Forrester.

Marketers and consumers have become more mature. They’re getting past the stage where they care only about the total number of users,” she said. “They’ve realized the important thing is the actual, active users.”

Baidu dismissed the idea that the deletions would have an impact on its business. The search giant removed more than 23,000 accounts from its popular PostBar, or Tieba, discussion forums, mostly for promoting “vulgar” culture or featuring erotic avatar images, the agency said.

It’s a vanishingly small percentage of the total number of Baidu PostBar accounts, which number in the hundreds of millions,” said Baidu spokesman Kaiser Kuo. He declined to comment further on what the company was doing to comply with the new requirements.

The regulator didn’t say whether Alibaba had deleted any accounts, but said the company had set up a special working group to manage usernames on its various platforms. Alibaba declined to comment.

Ms. Wang said further restrictions on speech could hurt the attractiveness of social media platforms, but said that companies were unlikely to resist. “With the Internet, you always have to obey certain rules if you want to operate a business in China,” she said.

Chinese e-commerce giant Alibaba’s debut makes a splash in first day of trading

China-Based Internet Company Alibaba Debuts On New York Stock Exchange

Founder and Executive Chairman of Alibaba Group Jack Ma attends the company’s initial price offering (IPO) at the New York Stock Exchange on September 19, 2014 in New York City.

Wall Street Journal:

 

Alibaba Group Holding Ltd., China‘s largest e-commerce company, on Friday became a publicly traded technology powerhouse, launching a blockbuster share offering in New York that drew attention world-wide.

Its first trade changed hands at $92.70, well above the $68 initial price that some investors paid, and shares finished the day at $93.89, giving the company a market value of $231 billion, larger than Procter & Gamble Co.

The 38% first-day gain handed buyers of the offering paper profits of more than $9 billion and easily topped the average 26% jump for U.S.-listed technology and Internet deals this year, according to Dealogic. The rise was especially impressive as larger deals typically have smaller one-day jumps.

The IPO fortifies Alibaba with a sizable war chest for possible acquisitions and product launches to compete with Chinese Internet rivals Tencent Holdings Ltd.and Baidu Inc., and allows it to quickly expand in overseas markets including the U.S. should it choose to do so.

Founded in Executive Chairman Jack Ma‘s apartment 15 years ago, Alibaba built its e-commerce empire by connecting China’s entrepreneurs, first with overseas clients and then with hundreds of millions of domestic consumers.

The former English teacher ranks among the wealthiest of China’s billionaires. He sold nearly $1 billion worth of stock in the IPO, and continues to hold a stake in the company worth about $18 billion at Friday’s close.

Mr. Ma has insisted the company will keep its primary focus on China, but the attention and financial clout from Friday’s offering could change that. Revenue for its most recent fiscal year was 52.5 billion yuan ($8.6 billion), less than one-eighth of Amazon.com Inc.,but its market value now exceeds the U.S. company’s.

George Zachary, general partner at Charles River Venturesin Menlo Park, Calif., said he now views Alibaba as a powerful global force, because of its scale, market value and cash holdings.

We should be careful of Alibaba because they could certainly start to control a lot of the landscape,” he said. “They are going to be the biggest e-commerce company.”

Its steep valuation poses hurdles. Alibaba now trades at a price that has Wall Street investors expecting strong growth even as it faces challenges including a transition to mobile commerce, where advertising rates are lower than for desktop users, and potentially slower-than-expected consumer growth in China.

Alibaba’s value is about 35 times what its underwriters forecast for next year’s earnings, according to people familiar with the banks’ projections. Rival Tencent trades at about 31 times earnings, while companies in the S&P 500 index trade at roughly 15 times.

Carlos Kirjner, an analyst at Sanford C. Bernstein & Co., estimated before the IPO that Alibaba’s fair value was around $215 billion. Now, valued at $231 billion, “the market is counting on spending per user to grow, and the company to invest the IPO profits wisely for future growth.” He said that meeting those targets is “very plausible,” but hardly “a no-brainer.”

In contrast to Facebook Inc.’s troubled IPO with confusion over missed trades, Alibaba’s first day went smoothly, coordinated by a gaggle of banks tasked with selling an Asian company in New York to investors across several continents.

Thanks to the heavy retail and institutional demand, underwriters are expected to exercise an option to sell more shares, which would vault the amount raised to $25 billion, a global record for a stock offering.

The deal’s 35 underwriters collectively earned as much as $300 million in fees, with the first five banks on the deal earning as much as $45 million each, according to people familiar with the terms. Those banks were Credit Suisse Group, Deutsche Bank, Goldman Sachs Group Inc.,J.P. Morgan Chase & Co. and Morgan Stanley. Alibaba also hired Rothschild as a separate adviser on the deal.

Yahoo Inc. sold 121.7 million shares in the deal, a bringing in about $5.1 billion after capital-gains taxes. It still owns 401.8 million shares.

While the company hasn’t been as well known outside of China, its IPO establishes it on the global stage. A majority of its shares were sold to U.S. investors, said people involved in the deal.

Friday’s debut also was watched closely around the world: Employees at the company’s headquarters in Hangzhou celebrated their new wealth with a fireworks display, Silicon Valley venture capitalists took in the spectacle with a mixture of awe and dread, and Wall Street bankers toasted the millions of dollars in fees the stock sales generated.

“To have the money is something that can make the heart feel more at ease,” said Tony Miao, who says his wife works at Alibaba and currently owns about 2,000 shares.

Publicity around the company in recent days helped drum up a “swell” of interest among ordinary investors, said Steve Quirka senior vice president of TD Ameritrade Holding Corp. He said Alibaba accounted for roughly 13% of TD Ameritrade’s trading volume.

Originally, “we weren’t sensing there would be this much activity,” Mr. Quirk said. “But in the last 48 hours it just picked up a lot.”

Still, only about 10% of the IPO went through retail channels, about two-thirds of which were set aside for friends, family, and employees designed by Alibaba itself, according to people familiar with the deal. Just a 4% sliver of the deal went broadly to small investors, the people said, in contrast to the more than 25% set aside for Facebook.

Investors who couldn’t obtain shares at Alibaba’s Thursday night price took to their computers Friday for a chance to buy a piece of the Chinese e-commerce company, even as shares at times neared the $100 mark.

Chris Kateyiannis was one determined buyer. A sophomore at Ohio State University, he placed an order at up to $81 per share before his Chinese language class began at 9 a.m. By the time he got out, the opening range had already exceeded that. In the school’s computer lab, Mr. Kateyiannis downloaded a web extension that refreshed his Fidelity brokerage account for him every few seconds, and he adjusted his order.

Just before his calculus class began at noon, his order finally went through at $94.79. Sitting in class, he discreetly used his phone to buy another round of shares when the price pulled back a little to $92.18. “I was still paying attention to the teacher,” he insisted.

With shares closing at $93.89, Mr. Kateyiannis was hardly a big winner. “I might sell half my shares in a few weeks if I need the money to invest in something else,” he said. “I’m going to hold on to some of it though—I think it’ll go up in the long-term.