Youku acquiring Tudou rumor signals cost and copyright problems in online video market

It’s rumored that Youku is planning acquire Tudou in the wake of the latter’s IPO halt. According to people involved with Tudou’s IPO process, the company has been drifting apart from investment banks, “With ever-rising copyrighted content prices and competitors has gone(Youku) or about to go(Xunlei, PPStream) IPO, the only way Tudou’s investors could make a nice exit might be selling Tudou to someone else. ”

Time is running out

Tudou had signed valuation adjustment mechanisms (VAM) with Singapore-based Temasek Holdings in its $35 million dollars worth of Series E funding last August. Under the terms, if Tudou failed to be listed this year, its founder and management team would possesses less stakes after dilution caused by Temasek’s justified holding of more stakes.

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