Tiger Global keeps faith in rally story of Chinese car listing site Bitauto
Hedge fund's partner buys into the Chinese car listing site amid 2,300 per cent surge since 2012
Tiger Global Management is making an almost US$600 million wager that the rally in Bitauto Holdings, the Chinese car listing website operator that has surged 2,300 per cent since 2012, is not over.
The hedge fund and private equity firm, which was founded by a protege of billionaire investor Julian Robertson, held a 14.9 per cent stake in Beijing-based Bitauto by September 12 after owning no shares by June 30, regulatory filings show. The position makes Tiger Global the largest holder of the company's United States-traded shares.
Scott Shleifer, the partner at New York-based Tiger Global responsible for the investment, is pouring money into a company that has managed to tap the soaring purchasing power of China's burgeoning middle class. Monthly car sales have more than tripled since 2008 to 1.47 million units in August, according to the China Association of Automobile Manufacturers. The gamble is that there is more room for gains after a rally that made Bitauto the best performer this year on Bloomberg's index of the biggest US-listed Chinese stocks.
"We have a well-respected fund making a significant investment," said Jim Oberweis, president of Oberweis Asset Management. "They probably look at the market and the opportunity for growth and say this is a pretty good market. It's a good business and the valuation makes sense. How much the stock's risen isn't relevant to me."
On the day Shleifer announced the Bitauto transaction, Tiger Global, which has US$15 billion in assets, also said in another filing that it ramped up its stake in that company's rival, Autohome, to 18.5 per cent, or more than US$300 million.
Annual per capita disposable income in China almost doubled to 26,955 yuan (HK$34,950) last year from 13,786 yuan in 2007, data from the National Bureau of Statistics showed. E-commerce sales increased 47 per cent to 629 billion yuan from April to June, surpassing 10 per cent of the country's consumer goods spending, according to data from internet consultant iResearch.
Bitauto has lost 0.3 per cent since September 12, trimming its rally this year to 163 per cent.
Tiger Global runs hedge fund, private equity and long-only stock strategies. The fund had gained 20 per cent in the first eight months of this year, according to a source.
Bitauto trades at 38 times estimated 12-month earnings. The multiple peaked at 44.6 on August 26. The average ratio for companies on the Bloomberg China-US Equity Index is 17.2.
The stock's surge has pushed Bitauto's market capitalisation to US$3.7 billion, six times what it was a year ago. Sina Corp, the Chinese internet media company that went public in the US 14 years ago and also provides car listings, has a market value of US$3 billion.
"Bitauto's stock price has fully reflected market expectations for its growth after quick gains," said Henry Guo, a senior analyst at JG Capital. "Its market value has even exceeded established internet companies that also run car listing service."
