Autohome Hit, Jumei Unfazed By Sputtering Market

Zhaopin files for IPO

The big IPO news of the day is Alibaba’s debut public filing for its long-awaited New York listing, but a flurry of other news in the space is continuing the recent stream of downbeat signals from the sputtering market. Leading the headlines are the latest terms for an offering by online cosmetics seller Jumei.com and a debut public filing for online recruitment firm Zhaopin.com, neither of which look too positive. The signals were equally negative from recently listed car information website Autohome (NYSE: ATHM), whose shares dived after it filed a fairly respectable first-quarter earnings report.

All of these latest signals send a message that the market is currently running on empty, and has perhaps a week of life left or maybe 2 at the most. The end could come even sooner if we see a sudden rush of companies trying to make offerings before time runs out, producing some ugly pricings and trading debuts.

All that said, let’s start this news round-up with Jumei, which made its first public IPO filing nearly a month ago. Since then the company has struggled to find an audience, cutting its original fund-raising target to $400 million from an initial $600 million. (previous post)

Now we’re getting word that Jumei has formally set a price range for its shares, which would raise an even smaller $200 million if it prices at the top of that range of $19.50 to $21.50 per American Depositary Share (ADS). (English article) The way things are going, I would expect the shares to price at the bottom of their range or even lower, meaning the company could ultimately raise just $150-$180 million.

From Jumei let’s look quickly at Zhaopin, which had the bad fortune to make its first public filing at almost the same time as the widely watched Alibaba. (Chinese article) According to media reports, Zhaopin is aiming to raise about $100 million, and would become the second major US-listed online recruitment firm after 51job (Nasdaq: JOBS).

The company’s financials don’t look all too exciting, with revenue rising just 12 percent in the most recent reporting period for which it gave data, while profit actually fell 7 percent. Given this kind of weak performance and the market’s rapidly deteriorating conditions, I seriously doubt that Zhaopin will be able to complete its offering and will ultimately end up scrapping the plan.

Lastly there’s Autohome, which went public in December at the height of the wave of positive sentiment, and which has just released its first-quarter results. Those results look mostly positive, showing the company’s revenue and profit both rose by more than 60 percent in the quarter to about $55 million and $20 million, respectively. (company announcement) The company also predicted that revenue would continue to grow at a similar rate in the current quarter.

Despite that relatively strong report, Autohome shares plunged 8 percent after it announced the results. Even after the drop to $31.70, its shares are still some 86 percent ahead of its IPO price of $17. But the latest price represents a sharp decline from the stock’s high of nearly $52 reached back in early March when sentiment towards Chinese tech firms was still strong.

Look for Autohome and most other US-listed Chinese tech firms to come under more pressure over the next few months, with downside of up to 30 percent possible for their shares. In the meantime, I would expect weak to ugly debuts for companies whose listings are nearing completion, including Jumei and security software specialist Cheetah Mobile. Companies like Zhaopin that have filed but are still in the early stages will get left out in the cold, and ultimately will have to delay their listing plans.

Bottom line: The latest signals from IPO candidate Jumei and recently listed Autohome show the market continues to deteriorate for new US listings, which are likely to post weak trading debuts if they move ahead.

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