Jumei Int'l (JMEI) Going Private
- Mix Fin&fun
- Feb 21, 2016
- 2 min read
Less than two year after its IPO, Jumei (NYSE: JMEI) announced a preliminary proposal for a management-led buyout on February 17, 2016. It proposed to take Jumei private for $7 per ADS - a 20% premium to Tuesday's close, but far below a 52-week high of $28.17.
Jumei was founded in 2010, and it grew quickly in popularity among female consumers. It soon became a leading cosmetics e-commerce platform in China, with 21.5% share of the online cosmetics market. I still remembered that a lot of girls at school talked about their purchase from Jumei.com. There are many external reasons for the success of Jumei, including the boom in China beauty market and the shift from offline to online purchasing. Also, Jumei’s strategy to focus only on the vertical of make-up and skin-care brands gave it an excellent advantage compared to the floundering competitors.
The founder, Chen Ou, is another important reason for the company success. He is such a character! He was well educated with Stanford MBA, and before Jumei he founded an online gaming platform called "Gerena" at school. As a young and good-looking entrepreneur, Chen became the company’s public face, and also an idol among young generation.
He filmed an advertising for Jumei and said in the ad “I’m Chen Ou, I speak for myself” to encourage young people to pursue their dreams. This creative ad aroused a strong resonance among young people and especially on social media websites.
Last year, China’s booming stock market prompted a raft of Chinese chief executives to take their U.S.-traded companies private and open an eye toward market resisting at home to fetch higher valuations. According to Chen's letter, Jumei was significantly undervalued, and the exit of US equity would give company more flexibility. However, Chen really disappointed many small investors. Investors protested about paying $22 per share, but now is offered less than a third of the IPO price for a buyout. Zhou Xiaohu, a famous Chinese VC investor, also said that the buyout will undermine global confidence in other China companies listed on NYSE and also took a hit on future IPO valuations.
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