(Ecns.cn)--The first Chinese Internet company listed on the NASDAQ and the impetus behind China.com and many other businesses, filed for bankruptcy protection this October. Some conclude the ground-breaking CDC Corporation was a flash in the pan and others contend that a series of unfortunate company decisions compounded sealed its fate.
On October 5, 2011, the news of the CDC move for protection from creditors triggered an unexpected, large-scale sell-off of shares, sending their value plummeting by more than 50 percent. The share price fell to $0.42 before NASDAQ suspended trading.
Founded in June 1997, CDC went public on the U.S. stock market in 1999, ahead of other market icons Sina, Sohu and NetEase. Business went well with meteoric rises in the initial stages, however, a succession of missteps eventually led the fumbling company to its recent legal refuge.
Last life-saving effort
On October 11, 2011, CDC announced it had received approval for bankruptcy protection from the U.S. Bankruptcy Court based in Atlanta, and formally entered the process of corporate protection. When the ticking bomb of insolvency finally exploded, an uproar burst from the Internet community in China.
In the early days, CDC earned it status as an Internet pioneer for all Asia. It evolved into a value-added operator of software applications and services, IT staffing, information technology consulting and new media businesses. Just a year after being listed, CDC's share price soared to $220.30 and it became the object of fanatical pursuit in the capital market.
However, CDC was entrapped in the Internet bubble of 2001. Company stock prices began to plummet abruptly when it could not find a clear direction out from under the historic industry downturn. When there seemed to be no profitable avenue of business for the company to develop, it went into gambling mode, shifting its focus to speculation-based ventures.
In November 2006, the Valuation Adjustment Mechanism (VAM) was seized upon as as a potential life saver, but this last-ditch effort turned out to be the last straw, and the proverbial one that broke the camel's back. CDC began to finance its operations by issuing bonds, in this case to 12 institutional investors, promising them that its two subsidiaries, CDC Software and CDC Games included, would mount IPO before November 13, 2009. The funds were slated for mergers and acquisitions. Through VAM a financing agreement was signed between hedge funds, however, the plan failed. Though CDC Software was listed on the NASDAQ in August 2009, CDC Games never achieved success.
The failure left CDC with a pile of debt, including $65.4 million to a U.S. hedge fund. A financial report showed the cash held by CDC as of June 30, 2011 amounted to only $91.8 million. The company was dragged to the edge of bankruptcy.
