We may soon have another pureplay CDN to invest in. ChinaCache has filed an F-1 with the SEC, preparing to rase something like $100M in an IPO on the Nasdaq under the symbol CCIH. And with such a filing comes a supply of financial data that lets us see just where the company fits alongside its peers. In 2009, ChinaCache took in $39.9M in revenue, recording $10.4M in adjusted EBITDA while losing $5.7M. In the first six months of 2010, revenues were $25.1M with $7.2M in EBITDA and a loss of $3.6M. So they’re a little under one third the size of Limelight Networks (NASDAQ:LLNW, news, filings).
ChinaCache is, obviously, focused on the Chinese CDN market. Actually, it pretty much *is* the Chinese CDN market, its direct competition includes only a few younger, smaller, Chinese-based companies. Foreign CDNs such as Akamai (NASDAQ:AKAM, news, filings), Limelight, and Level 3 Communications (NYSE:LVLT, news, filings) only do business here via a partner, and take a wild guess who is invariably that partner. China’s web of relationships and bureaucratic hurdles will probably keep it that way, and one might think of ChinaCache as the Baidu of the CDN space. Why list on the NASDAQ? Well, because that’s where the money is, of course.
That’s not to say there aren’t risks. Trying to understand the maze that is their corporate ownership and or the web of internal contractual relationships is an exercise in futility – even if you parse the SEC language it is clear that there are unspoken relationships underlying the words. It’s always that way when foreign money is harnessed to do business in China, and as Google found out – it’s not for the faint-hearted.
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There’s another Chinese-based CDN company called chinanetcenter which listed in China Growth Enterprise Market, whose net profit in the first six months of 2010 reported CNY14.98 million (US$2.23 million) compaired to Chinacache’s a loss of CNY24.2 million (US$3.6 million);
Also, Chinanetcenter is the only partner of Akamai in Chinese CDN market, which you can check out by doing some research.
I will check them out. Thanks.
Where do you come up with “So they’re a little over half the size of Limelight Networks”
None of the numbers you posted suggest that.
Oops, that should have been ‘under’ – I mixed and matched two different trial sentences, with poor results. My apologies – I have adjusted the text.
Wow, You went from over half the size of Limelight to UNDER 1/3.
Yes, I don’t often flub the math, but it does happen. Thanks for keeping me honest.
I think you did it on purpose.
rob powell – telecom blog writer by day… limelight hater by night. give it a rest bnb.
chinacache is the best in china
Several CDN companies in China are profitable while Chinacache is losing money. You call it the best one in China?
Who is Shanghai JNet? What kind of company it is? Can’t find any detailed info from the F-1. Neither from the web. My friends in China in this industry never heard of it. Why Chinacache spent so much money to acquire it? I smell fishy here.
I know China CDN market quite well. ChinaCache’s market share is shrinking. The size of their network is only ranked 3rd or 4th in the market which is about 100Gb/s total. Chinanetcenter has 300G. And the 2nd player has about 150G. And there is another one which is about 100G.
ChinaCache is trying to raise 50-60M which means their valuation premoney is 150-180M. Their value of last round was 120M. The VC only gets 25%-50% gain. Everytime you see this kind of IPO, you better be careful. The VCs have lost patience on the “best” CDN company in China.
CCIH’s falsifying their SEC financial statements.
In 2008, Shanghai Jnet, a wholly owned subsidary of ChinaCache had only RMB3.25M in revenue in its financial filings with China’s State Administration for Industry and Commerce(“AIC”). But in the SEC F-1 filing on page 86, the revenue is RMB33.5 which accounts for 11.7% of ChinaCache’s 2008 revenue. The AIC-reported revenue is substantially lower than SEC-reported financial figures. This provides material evidence that CCIH is fabricating its SEC financials.
CCIH management and insider shareholders live in China. The AIC filings are filed with the Chinese government, whereas the SEC filings are filed with the U.S. government. Management is concerned about violating Chinese law and providing false information to the Chinese government. But they are indifferent to defrauding the US government and breaking US law. A Chinese resident does not have to obey U.S. law any more than a U.S. resident is required to obey Chinese law. That’s why they report the accurate numbers to the Chinese government, and the fake numbers to the U.S. government. There are practically no repercussions to Chinese management teams that defraud foreign investors. Numerous U.S.-listed companies, like CXTI, CYXI and CHFI, have seen their management teams vanish with the companies’ assets, and suffer no legal repercussions. Defrauding U.S. investors is not a violation of Chinese law, whereas defrauding the Chinese government is.
If the AIC-reported financial statement is false, it will face a lawsuit or penalty from the government and this risk is not disclosed and it’s a hidden risk to the investors.
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