Tudou's chief executive, Gary Wei Wang, cannot breath a sigh of relief just yet.

The founder of the online video company has settled a court case with his ex-wife over who owns what, which has dogged the company since it first tried to go public last November.

Tudou, the second largest online video company in China, can't expect the same welcome to the US markets that it might have had at the end of last year -- the 146.5 per cent first day pop that rival Youku enjoyed in December.

Many Chinese internet stocks have fallen in recent months on fears of a bubble in the sector, and a sudden aversion to the connection with China, sparked by fraud allegations including those levelled at Sino-Forest.

Just this week two Chinese internet companies, Xunlei and Shanda Literature, have postponed their IPOs citing a weak market.

And nor, necessarily should the company get the same reception, as even though the troublesome ex-wife seems to be out of the picture (and even that is not completely sure -- see this WSJ story), the company faces several other challenges.

The loss-making company faces tougher competition, battles over intellectual property and a fight for bandwidth in the fast-growing internet industry.

Tudou has made net losses in the last three years and the losses are getting bigger. It lost Rmb347m in the whole of 2010 but for the first three months of 2011, it lost Rmb336m, according to its prospectus. It expects its expenses to continued to climb.

The company needs to invest fast in quality content and increasing its bandwidth to keep up as it competes for viewers and the advertising revenue that comes with them.

"China’s online video industry is intensely competitive and we face competition from many independent online video websites, large Chinese Internet companies and major TV websites," it said in the prospectus.

Tudou's rivals stretch from internet giants like Baidu and Sina, to major TV networks like CCTV.

"Some of these competitors have significantly greater financial resources, longer operating histories or more experience in attracting and retaining users and managing relationships with advertisers and advertising agencies than we do," it added.

The company also needs money to fight off copyright litigation -- having already fought 587 cases in China since its inception, losing half of the 364 which have been concluded. Tudou has had to pay out damages of between Rmb1,000 and Rmb50,000 per case, it said in the prospectus.

Last but not least, as Chinese consumers flood online the providers are having trouble keeping up with their bandwidth requirements. Video streaming is bandwidth-heavy and Tudou could be hit hard by any attempt to make them pay more -- as it made up 38.5 per cent of their total cost of revenues in 2010.

It is abundantly clear why the company wants to raise money, but perhaps less obvious how it's going to make it in the future. Youku may have had a very successful IPO, but just three months after, it disappointed analysts with its outlook.

See also:
The trouble with China's online video business model - FT Tilt
Full coverage of the Chinese internet - FT Tilt