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Chinese Online Video Stocks Drop Amid Regulatory, Merger Concerns

A stock specialist on the floor of the New York Stock Exchange
Stan Honda/AFP/Getty Images

The stocks of Youku and Tudou, which it is scheduled to acquire, are hit by stricter regulations calling for the companies to pre-screen all content.

The stocks of Chinese online video Youku and Tudou, which it is scheduled to acquire later this year, have dropped this week amid new investor concerns.

Chinese government regulators are cracking down on increasingly popular online video content with stricter rules, and one of the companies' top executives is departing in the middle of the preparations for the integration of Youku and Tudou.

China's regulators have told Internet video providers that they must pre-screen all programs before making them available, which is seen as affecting drama series and movies, the Associated Press reported. They said the stricter rules come amid growing online video usage and what they called vulgar content, excessive violence or pornography, according to the report.

Meanwhile, Bloomberg News reported that the resignation of Tudou COO Xiangyun Wang this week is also weighing on the stocks. He is the first senior manager to leave the company after its agreement to be acquired by Youku, it said.

The New York-traded stock of Tudou closed down Wednesday for a fifth day in a row and hit its lowest level in four month. It closed at $27.41. It has traded between $9.50 and $44.88 over the past year.
 
Meanwhile, Youku's stock also dropped and hit the lowest level since January. It closed at $18.21 on Wednesday, compared with its 52-week trading range of $13.76-$38.33.

Youku has been striking content deals with major Hollywood conglomerates, most recently with NBCUniversal.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai