Shares in Chinese smartphone maker Coolpad fall sharply despite US$352m LeTV investment

PUBLISHED : Monday, 06 July, 2015, 1:26pm
UPDATED : Friday, 10 July, 2015, 8:19am

Shares of Coolpad Group, one of mainland China’s leading smartphone suppliers, fell sharply in early trading on Monday, roughly a week after the company raised US$352 million from new investor LeTV.

Shenzhen-based Coolpad saw its share price shed as much as 27 per cent to reach HK$1.53 as analysts saw a correction in the market. Its shares were down 18.5 per cent to close at HK$1.85 on Monday.

“Coolpad shares were overvalued and trading at a premium in recent months,” said Guotai Junan International research analyst Ricky Lai, who has issued a “sell” rating on the stock.

Lai pointed out that Coolpad, despite the new investment it raised recently, was “too dependent on its home market” to grow smartphone sales.

“Unlike Xiaomi, Huawei Technologies, ZTE or Lenovo, Coolpad has not expanded aggressively in overseas markets,” he said.

Guo Deying, the chairman and chief executive at Coolpad, said in March that the company will focus its research and development resources in 4G smartphones and relevant mobile applications to meet demand in mainland China, the world’s biggest market for smartphones.

Technology research firm IDC ranked Coolpad as the fifth-largest smartphone supplier on the mainland last year, behind Xiaomi, Samsung Electronics, Lenovo and Huawei Technologies.

Coolpad, formerly known as China Wireless Technologies, seized a 9.4 per cent share of the total 420.7 million 3G and 4G smartphones shipped last year in mainland China.

In March, the company sought to address questions about its expansion efforts by creating four smartphone business units to widen distribution.

An overseas unit handles customised smartphone orders from mobile network operators outside the mainland. A domestic unit oversees sales of Coolpad brand smartphones to the three big telecommunications operators in mainland China. Another unit covers the company’s “ivvi” brand smartphones sold through retail stores.

An e-commerce unit handles sales of its “Dazen” brand smartphones. In December, internet firm Qihoo 360 Technology agreed to invest US$409.1 million to form a joint venture with Coolpad to sell these smartphones.

Beijing-based online video content provider LeTV, recently bought an 18 per cent stake in Coolpad to become the smartphone firm’s second-largest shareholder. LeTV’s stake in Coolpad means that Qihoo’s joint venture partner could now be supporting a competitor in the Chinese smartphone market. Following the news, Qihoo chief executive Zhou Hongyi wrote on WeChat that he had been "stabbed in the back".