500.com Ups IPO Price, Suning In Silicon Valley
More mixed signals are coming from the IPO space, with listing candidate 500.com raising the price range for its shares indicating that demand is better than previously thought. The lifting of the range for its American Depositary Shares (ADSs) comes just a day after 2 recently listed Internet companies, Qunar (Nasdaq: QUNR) and LightInTheBox (NYSE: LITB), announced new quarterly results that showed both were losing money. In what could be another piece of IPO news, Internet aspirant Suning (Shenzhen: 002024) has made a high profile move outside China by opening an R&D center in the US, leading me to speculate that perhaps the company could be eying an offshore IPO in the next year or two.
The air has been filled with mixed signals on new offshore IPOs by Chinese tech firms this past week, which isn’t too surprising considering the market’s volatile situation. The market went into deep freeze over the last 2 years after investors lost interest in the sector due to a series of accounting scandals. It finally started to regain some life in October, only to again lose some of that momentum over the last week.
Reflecting the fickleness investors are feeling, shares of Qunar and LightInTheBox reacted quite differently when each announced results that both looked disappointing. LightInTheBox shares tanked 23 percent after it released its report showing it slipped back into the red after briefly posting a profit. (previous post) Qunar’s shares initially tumbled after it posted a large loss, but later came back and ended up 2.5 percent on the day.
Now in the latest sign of how fickle investors can be, 500.com, an online seller of lottery tickets, says it has raised the price range for its upcoming New York IPO to $11-$13 per American Depositary Share (ADS), a relatively sharp boost from its previous range of $9-$11. That positive sign comes just a week after 500.com made negative noise by announcing it had more than halved the size of its IPO due to weak investor sentiment. (previous post)
We’re also getting a few more financials out of the company, which include the important fact that it has been profitable for the last few years, including a near doubling of profit in the first 9 months of this year to 20.6 million yuan ($3.4 million). My guess is that investors were initially skeptical about the company, but perhaps they’ve slowly warmed up to it and have more confidence in its financials and longer term growth story. If that’s the case, perhaps we’ll see the shares price in the middle to upper end of the new range, with the company ultimately raising a bit more than the $64 million it was targeting after cutting the offering size last week.
Meantime, Suning says it has opened an R&D center in Silicon Valley as it seeks to transform from its roots as a traditional retailer to an Internet company. (Chinese article) Suning says the move is designed to help it attract more talent during that transformation. The move looks largely symbolic to me, as the opening of a Silicon Valley office will certainly add to the company’s high-tech credentials.
But the move also has another interesting overtone, since Suning is one of China’s few emerging Internet leaders without an overseas listing. The company’s stock now only trades in Shenzhen on the A-share market, unlike most other major Chinese Internet firms that are either listed in Hong Kong or New York. That leads me to speculate that this Silicon Valley move by Suning may indicate the company wants to burnish its Internet credentials with a listing in either New York or Hong Kong in the next 2 years. Such a listing would certainly be interesting, offering investors yet another choice for betting on the Chinese Internet.
Bottom line: 500.com’s IPO could price at the mid- to upper-end of its newly raised price range, while Suning’s new Silicon Valley move could indicate it plans an offshore IPO in the next 2 years.