Many shareholders in e-commerce firm Dangdang (NYSE: DANG ) might be thinking of selling their stock after hearing about the company's latest disappointing announcement of a tie-up with Wal-Mart-backed Yhd.com. The nature of the tie-up, which will see the pair cross-promote each others' services, was a bit of a let down, especially since many had been hoping for something more substantial including an equity exchange. Dangdang had previously confirmed it would announce a tie-up after rumors of an alliance first appeared a few weeks ago. This kind of hype followed by disappointment is quite typical of Dangdang's co-founder and CEO Li Guoqing, whose fierce independence could ultimately lead to the marginalization or even death of his company.
I'm clearly not too bullish on this latest news from Dangdang, but US investors were a little more upbeat. The company's shares rose 4% in New York trading after the announcement, extending a massive rally that has seen Dangdang's stock soar 70% since it reported last week that it returned to profitability in the fourth quarter after two years of losses. Many might consider selling the stock on this latest news partly due to disappointment, but also because the recent rally is probably a bit overblown.
Let's take a closer look at the latest tie-up, which will see Dangdang open a bookstore on Yhd.com's platform, and Yhd.com open a supermarket on Dangdang's open Marketplace platform. (company announcement; Chinese article) Dangdang is certainly hyping the news, but this particular alliance doesn't seem very unusual or even cause for much excitement......
...at the end of the day, Yhd is just one more merchant among hundreds on Dangdang's Marketplace platform, and it's hard to see why this particular tie-up has any real special meaning besides to create hype.
Master of Empty Gestures
More broadly speaking, this kind of announcement is increasingly typical of Dangdang and Li Guoqing, who also disappointed industry watchers two years ago with his formation of a similar tie-up with electronics retailing giant Gome. That tie-up also looked full of potential due to the companies' highly complementary strengths in online and offline retail, but it also ended up being mostly hype........
www.fool.com/investing/general/2014/03/07/...w-yhd-tie-up.aspx