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24Quan “Temporarily Closes Doors” – Cites Investor Dissension

Time for a long vacation

24quan, china, dailydealmedia.comOne of the top five daily dealers in China has closed its web based doors, at least temporarily. Although the underlying reason may be the same (the slowdown in daily dealing) the particular reason that 24Quan.com is taking a long vacation is due to dissension among its investors.

The site has been closed since Saturday, with just a smattering of brief Chinese and English announcements stating the site will be taking a “long vacation due to misalignment of interest and ideology differences between the company’s previous shareholders and management team. 24Quan will not be able to offer you services in the upcoming few weeks, and is expected to resume service after resolving matters with the shareholders“. The company posted a phone number for consumers to use should they encounter issues using the vouchers they had already paid for.

The catalyst

According to a Phoenix news report on Monday, 24Quan had closed the site because shareholders had withdrawn their venture capital and some creditors had demanded monetary claims in court. It looks as though investors in 24Quan have taken back $2.4 million in funding that had been promised to the company. Rumors suggest that management was unaware that the funds were going to be withdrawn.

The company has also been forbidden to seek any additional rounds of external funding until the current issues can (if possible) be worked out. Obviously pulling resources put not only an emotional strain on the 24Quan management team and employees; it has also tied the company’s hands financially. The investor actions triggered company protests that eventually caused management to suspend the site services until the investors returned the funds.

Losing money

24Quan had already been shutting down branch offices across China due to shortage of money and those that were underperforming. Various reports coming out of China suggest that ALL of the top 10 group-buying sites in China are losing money and are primarily funded by money from private ventures which expect to make profits from their (IPO) listings. There are certainly no guarantees that China daily dealers will be able to go public.

It seems to me the only bargaining chip that 24Quan has to entice those investors back is the ability to take the company public. Without that, it would make little to no sense for the investors to hand the appropriated funds back over, since the business itself seems like a losing proposition.

ZDNet

 

Don Young

Don Young, Jr. is a beat writer for Daily Deal Media, the number one resource for the Daily Deal Industry. Don has spent over a decade as a stock broker / advisor focusing on fundamental and technical analysis. Prior to that he was the sole proprietor of The Tile Guy , based in Portland,Or. completing multitudes of both residential and commercial projects in the Pacific Northwest. Don enjoys researching new businesses , market forecasting, traveling, cooking, volleyball , golf and relaxing with family and friends.
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