E-Commerce China Dangdang
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
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
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.
There are now nearly 10 active Chinese growth stock recommendations in the Rule Breakers newsletter service, and Dangdang isn't one of them. Check them out with a free 30-day trial subscription.
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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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