Why Tudou Holdings Shares Were Slammed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Internet video-sharing website Tudou Holdings (NAS: TUDO) shed as much as 11% of their value earlier in the trading day after Chinese officials announced a content crackdown that could significantly affect its revenue generation capabilities.

So what: You can almost see Youku.com (NYS: YOKU) starting to sweat. Youku, China's largest online video company by market share, agreed to buy Tudou for $1 billion in stock back in March. Today, it's probably regretting that move following the Chinese government's announcement that it would be cracking down on pornographic and violent material on the Web. Youku has little to worry about; however, Tudou derives a sizable chunk of its revenue from sources the Chinese government may consider questionable. These new regulations could require that additional staff be trained on Tudou's end to censor inappropriate material on its network.

Now what: This isn't the first time that China has taken to blocking particular online content from its citizens. The most popular Web destination in the world, Facebook (NAS: FB) , is blocked, while Google (NAS: GOOG) completely abandoned the idea of utilizing its search engine in China. Google-owned YouTube is also banned. It's a little early to know just how much of an impact this will have on Tudou, but consider this just another reminder that China-based investments come with unique and heightened risks.

Craving more input? Start by adding Tudou Holdings to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Facebook and Google. Motley Fool newsletter services have recommended buying shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.