E-Commerce China Dangdang (NYSE: DANG ) began the year with a chip on its shoulder. After the company went public at $16 last December -- and saw its stock hit an intraday high of $36.40 a month later -- CEO Guoqing Li openly criticized lead underwriter Morgan Stanley (NYSE: MS ) for leaving money on the table.
If investors were willing to pay more than twice Dangdang's IPO price a few weeks after underwriters closed the deal, why wasn't Dangdang priced higher so it could have raised more money?
However, now that Dangdang has gone on to not only give up all of its post-IPO gains but fall all the way down to the single digits, we can't even say that Morgan Stanley got the last laugh, because its prized clients are stinging badly if they held on this long.
Dangdang was an easy story stock for underwriters to move. It was "the Amazon.com (Nasdaq: AMZN ) of China" as a Web-based retailer, though the only real similarity is that both companies got their start selling books.
A ticker symbol can say so much
Things haven't gone well for Dangdang. After briefly flirting with profitability, the e-tailer has posted back-to-back quarters of significantly wider-than-expected deficits.
Dangdang was just too small for its once lofty valuation. Sure, there were 10.8 million orders placed last quarter, but the average order here is for just a little more than $13. Books! Why did it have to be books? In China!
Dangdang has been pushing to broader merchandise -- as Amazon successfully did -- but all of this has come at the expense of margins.
Requirements of a strong presence in nailing the final mile -- from offering same-day deliveries to manning a cash-on-delivery network in dozens of cities to make sure it gets paid -- don't seem to make this the kind of dot-com model that would go over too well with stateside investors.
Dangdang went public on the same day last December as leading video-sharing website Youku.com (NYSE: YOKU ) . Both companies share similar trajectories. They both soared early on, but have come crashing down hard in recent months. The saving grace for Youku is that at least it's still trading for more than its IPO price.
Dangdang's lack of profitability and analyst expectations for the red ink to get even worse next year have turned the Amazon.com of China into the Pets.com of China.
It's been a bad year for those who went long Dangdang, but fundamentally speaking, the once-promising Chinese e-tailer has earned every downtick.
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