An investor who participated in Chinese online video site Tudou's aborted IPO has claimed that, caught between rising copyright licensing fees and commitments to its investors, Tudou is looking to be acquired by another firm such as Chinese online video site Youku (NYSE: YOKU). Tudou and its investors have been drifting apart recently as the the company has made no effort to resume its IPO bid, according to the unnamed source.
The investor reports that Tudou recently stopped taking steps towards an IPO and for the short-term is unable to resume the process. "As licensing fees continue to rise and competitors like Xunlei and Shanghai-based P2P video service provider PPS (PPStream) are on the verge of listing, Tudou has no way to pay returns to its investors other than to sell," said the source. Tudou received USD 35 mln in fifth-round funding from Temasek Holdings in August last year after signing an IPO valuation-adjustment mechanism (VAM) agreement with the investment firm. If Tudou fails to IPO this year, the company's founders and senior management will see their stakes further diluted and Temasek will increase its shares and influence over the company.