News | Bertelsmann Investments | Beijing, 11/30/2010

BAI Accompanies BitAuto To The New York Stock Exchange

It’s the thing that every venture capitalist dreams of: a company you co-financed and supported eventually goes public. And if the investor is then invited to attend the funded company's IPO in New York and is given the special honor of ringing the stock exchange bell on Wall Street with the company’s Board, the dream has well and truly come true – who could ask for anything more in the world of investment funds? The Bertelsmann investment company Bertelsmann Asia Investment (BAI) and its Director Annabelle Long were treated to precisely this wonderful experience on Nov 17 – the day the BAI holding BitAuto, the Chinese market leader for online content and online marketing in the automotive sector, was first listed on the New York Stock Exchange. Annabelle Long was there along with BitAuto’s management team in the gallery of the stock exchange to ring the bell ending the day’s trading.

In fact, its first day of trading ended with a significant gain for the BitAuto share, which was 22 times oversubscribed. Its issue price of $12, already at the upper end of the range, rose by 3.75 percent to $12.45 over the course of the day – despite the Dow Jones index falling by a full 160 points. The share price has since soared to above $13. Annabelle Long is not surprised. “BitAuto and its business have captured the imagination of investors enormously,” explains the fund specialist, who also heads Bertelsmann’s Corporate Center in Beijing. “Right now if you can mention the three words China, Internet and Automobile in connection with an IPO, you’ve basically already won.”

When BAI first bought a stake in the company, it was by no means foreseeable that the fledgling online company would go public so quickly. “We carefully analyzed and observed BitAuto for over a year before we took advantage of the extremely attractive market entry conditions in September 2009,” recalls Annabelle Long. At the time BAI acquired a ten-percent stake in the company, which is also funded by DCM, a major international investment fund, and Legend Capital, a leading Chinese firm. Due to the global economic and financial crisis in the fall of 2009 most observers were expecting growth to slow also in the Chinese automotive industry as well, and BitAuto shares were accordingly priced at a favorable rate. But the slump never happened. Quite the opposite: With 13 million vehicles sold, China overtook the U.S. as the world’s largest automobile market for the first time. This year, an estimated 17 million new cars have already streamed onto China's roads.

However, as with its other investments, the chance of a possible IPO in the near future was not a decisive factor for BAI when it acquired the BitAuto stake. Unlike many other funds, Bertelsmann Asia Investments sees itself as a strategic fund focusing on long-term investments, in sectors where Bertelsmann is already active, such as education, media and technology. “We’re interested in long-term access to attractive markets and ideas, not quick profits,” says Long.

BAI was launched in January 2008 and announced its first shareholding in April of that year: a stake in China Distance Education Holding, a company specializing in online adult education. The company went public in August 2008 and is today the largest of its kind in China. The second investment was the yoho.cn portal, a leading cross-media platform focused on youth lifestyle topics. In 2009 Yoho was listed as the Chinese Ministry of Commerce’s ten most successful e-commerce start-ups in the country. In September 2009, the aforementioned shareholding in BitAuto was acquired. This was followed shortly afterwards in November 2009 by a 2.9-percent stake in the Internet company Phoenix New Media, which operates the Internet portal ifeng.com - one of the country’s largest hubs offering news and other content plus a streaming video service (v.ifeng.com) and mobile services (ifeng mobile). In addition to these four direct investments, BAI has also invested in three investment companies, Morningside, KeyTone Ventures and Innovation Works, whose investments all have a focus similar to that of Bertelsmann’s fund.