China IPOs

Imagine you are bidding for an item on eBay, and the lowest bid wins while the highest bid loses. Impossible? That is what is happening in the world of Chinese initial public offerings. 

China’s IPO season has officially reopened. Five companies said on Tuesday they had received approval from the China Securities Regulatory Commission to issue new shares, bringing China’s longest ever IPO drought to an end. 

The end of a year-long freeze on stock market listings in China might sound look good news for investors but for several reasons Chinese stocks fell on Monday, the first day of trading since the weekend announcement, with the ChiNext Composite index – representing China’s answer to the Nasdaq exchange – plunging 8.26 per cent, its biggest single day decline in its four-year history. 

Who’s afraid of investing in small Chinese companies? Not US investors. Shares in Qunar, a popular travel website owned by Baidu, surged by as much as 133 per cent on their debut on the Nasdaq Stock Market on Friday.

The shares, priced at $15 a piece – well above the initial target range of $12-$14, ended the day at $28.40. 

Are US-listed Chinese stocks back?

Judging by the 42 per cent share price pop enjoyed by 58.com on its first day of trading on Thursday, one would be inclined to think so. Don’t get too carried away though. 

Two more Chinese companies are looking to try their luck on Wall Street.

500.com, China’s leading online sports lottery service provider, and Sungy Mobile, a mobile app developer have on Tuesday filed plans with the US Securities and Exchange Commission to raise up to $150m and $80m respectively via initial public offerings. 

It may only be a small deal, but investors couldn’t get enough of it. Forgame, the Chinese online gaming company, soared by a third on its market debut on Thursday, the only new deal this year to see a day-one pop.

At $200m, the IPO is hardly a blockbuster. But it does highlight a key problem – and a big opportunity – for Hong Kong: a lack of good technology stocks. 

The door is not exactly being kicked wide open. But after two years of accounting scandals and critical reports from short-sellers, Chinese companies are slowly making their way back to Wall Street again – and it’s not just Alibaba eyeing up New York.

On Monday, Qunar, a popular travel website in China, filed paperwork with the US Securities and Exchange Commission to raise $125m in an initial public offering.

The move comes just three days after 58.com, China’s answer to Craigslist, filed to list on the New York Stock Exchange with an offer to sell $150m of ordinary shares in the form of American Depository Shares (ADSs). A day earlier, Montage Technology Group, a Shanghai-based computer chip maker, raised $71m in its public debut. 

One of China’s top investment banks has taken a step towards going public with China International Capital Corporation preparing the early ground work for an initial public offering to raise capital.

Levin Zhu, chief executive of the brokerage, has commissioned an internal study to look into the possibility of listing, said people familiar with the matter.

 

China’s Securities Regulatory Commission has begun consultation on a new round of IPO reform, raising hopes that it is preparing to lift its most recent ban on initial public offerings, imposed last year to speed up reform and stabilise a weak domestic market. But many are urging Xiao Gang, the CSRC’s new chairman (pictured), to take the proposed reform further. 

China Everbright Bank is trying for the third time to make its debut in Hong Kong’s IPO market. Will it be lucky this time around?

Bankers close to the deal told beyondbrics that Everbright had filed an application, the well-known Form A1, to the Hong Kong Exchange last week, officially beginning the mid-sized state lender’s third attempt to raise funds in Hong Kong. 

After an IPO drought in Hong Kong lasting more than half a year, China Galaxy Securities Co Ltd raised $1.07bn in an initial public offering on Wednesday, the largest local deal so far this year and a cheer-up both for Hong Kong’s IPO market and for investment bankers.

Galaxy is China’s biggest brokerage in terms of clients base and its seventh largest in terms of revenue. It sold 1.57bn shares at HK$5.3 (68 US cents) a share, according to two bankers familiar with the deal. 

The media and netizens alike have been chatting up a storm about the upcoming Alibaba IPO. Even though the offer has not been officially announced, estimates of the company’s potential value once it is listed on the Hong Kong Stock Exchange have literally doubled in the past six months.

Is this a repeat of the frenzy that accompanied Facebook’s IPO, which ended in crashing disappointment when the stock plunged after the sale? Or can Alibaba Group make a better fist of handling the market? 

China’s equity rally has clearly run into some trouble in recent weeks. The Shanghai index dropped a further 1 per cent on Wednesday, taking it into negative territory for 2013. Among the plethora of reasons offered for the stumbling run is the overhang of IPOs, and the potential that some of them might come to market soon.

But would a series of new issues really be so bad for the market? 

January was a scary month for China’s machinery makers and their investors. First, Zoomlion was accused by a “concerned investor” of booking phantom sales, then Caterpillar accused its own recently-acquired Chinese subsidiary of accounting misconduct and took a $580m write down on the value of the deal.

Time for a ghostbusting analyst to bring some rational rigour to the sector.