Category Archives: IPO

Be Careful With The Chinese Internet Stocks

Momo is the latest Chinese tech-company you’ve probably never heard of that has plans to list its stock in the US. From what I have seen, Momo has over 180 million registered accounts, with more than 60 million being considered active monthly users and more than 2.3 million paying subscribers. In fact Momo is now estimated to be the second most popular social app in China, after “WeChat.” The company launched in 2011 as a location based instant messaging application, which basically allows users to chat with others that are in their general vicinity. Momo describes itself as a service for people to meet other users with similar interests, allowing people that are at the same party or nightclub to basically “hook up.” Whether that is just strictly a platonic match or not is highly debatable. The Chinese government earlier this year linked the app to possible prostitution in a widespread crackdown on “inappropriate” material on the internet. Some popular overseas apps like Viber and Line were actually banned by the Chinese authorities. Remember, this country’s far-reaching censorship laws are constantly evolving, with no forewarning as to what their next crackdown may be, which could prove problematic for Momo or other high-tech web based companies in the future. Of course, the recent crackdown could have just been one of many cleverly disguised protectionist moves by the Chinese government, which are really designed to eliminate foreign competition. It’s not clear how Momo was impacted by the legislation, but “WeChat” did end up having to remove 20 million accounts that had ties to obscene and/or fraudulent content. Chinese tech stocks have done well on US stock markets, but you have to wonder about the future of social networking companies to some degree. There are hundreds – possibly thousands – of them now. It’s almost impossible to keep an accurate tally. They seem to pop up as quickly as they disappear. I’m also worried about Chinese government censorship, and how quickly it can change the entire game. All I’m saying is be careful. Even though the excitement surrounding the potential in China is enticing, make certain you are considering ALL the possible risk scenarios. Always remember, “the return of your money is more important than the return on your money.”