The chairwoman of DangDang has published a long letter explaining what caused husband and CEO Guoqing Li to freak out on twitter and trade insults with an alleged Morgan Stanley banker.
Basically her husband didn’t understand how IPOs get priced for a pop, according to the letter translated by iChinaStock. In the case of DangDang, no one knew what they were getting into and the stock was extremely underpriced.
Peggy Yu claims she didn’t realise anything was wrong until the hosts on CNBC started asking if she thought the IPO was underpriced.
Morgan Stanley set DangDang’s first private offering at $11 to $13. High demand prompted them to increase the price to $13 to $15. When Yu asked them to increase the price further, the bankers warned her that they would lose orders. Then on the day of the IPO, DANG opened at $25.50 and closed around $30.
Around this time Yu realised how much money they had lost out on. She remained calm, but her husband, CEO Guoqing Li, refused to go to a celebratory dinner with Morgan Stanley. Instead he went and wrote obscene lyrics insulting the bank. This rhymes in Mandarin:
To nail down the business, you little rats gave a value of $1 to $6 billion. Upon writing the prospectus in Hong Kong, anticipating a dog fight between North and South Korea, you put $0.7, $0.8 billion instead. Don’t fuck with me. I’m really pissed off. My wife enjoyed herself in the roadshow, and we forgot to notice your hidden smiles. Fucking bastards knew beforehand market cap would reach $2billion and put the price at $16 with market cap of $1.1 billion. Right after the opening next day, CFO was almost scared to pee in his pants. I will hold onto this. And let me fuck all of you up after this drama is over.
Then the twitter fight started, as a blogger named Big Morgan Lady told Li to “Go to Goldman Sachs to see if they want to **** the six holes on your body.” Big Morgan Lady also accused Li of “sponging off his wife.”
Yu says she doesn’t think Big Morgan Lady was a bank employee, because the underwriting team did not include any women, nor did she meet any women at Morgan Stanley who spoke fluent Mandarin.
Here’s Yu’s advice for other companies looking to IPO:
For most CEOs and entrepreneurs, IPO is a “super-experience” process, because we entrepreneurs usually would only have one IPO throughout life-time…
IPO is the gambling among the company, underwriters, and funds and so on. Each side’s profit goal contradicts each other. It is just a fact, and there is no need to avoid saying that aloud. It is human nature to be sensitive when it comes to money. In the critical moment, I was actually not sensitive enough…
The US stock market has approximately hundreds of years’ history, while the China-based companies going public in the US have only around one decade’s’ history. Our local entrepreneurs need to learn, not only technology and management, but also the know-how to win the game in the capital market, from our European and North American counterparts.