The winter for China IPOs in New York has officially moved into deep freeze with the official announcement that car rental specialist China Auto, the first Chinese company to file for a US listing back in January, has formally scrapped the offering. (Chinese article) The official withdrawal, made in a filing to the US securities regulator, marks the end of a choppy story that saw the money-losing China Auto filled with optimism when it initially filed for a Nasdaq IPO to raise up to $300 million in January, hoping that US investor skepticism towards Chinese companies had eased following a confidence crisis the previous year due to a series of accounting scandals. The first signs that perhaps the climate hadn’t improved too much came in the next couple of months, when China Auto’s IPO failed to make much progress, presumably due to lack of investor interest. The situation got worse still when online discount retailer Vipshop (NYSE: VIPS) did finally become the first Chinese company to list in the US in March, but only after it had to drastically scale back the offering due to anemic demand. (previous post) And even then, its shares priced below their original range and dropped sharply in their first few trading days. Despite that dismal performance, China Auto moved ahead with its own offering, which also met with anemic demand that forced it to halve the size of its original capital raising plan. But even that reduced plan soon looked ambitious, and it ended up suspending the offering just hours before it was set to price in late April. (previous post) The aborted offering means we could soon go an entire year with just one new listing for a Chinese company in the US. The last major listing before the current freeze came back in August last year, when online video company Tudou (Nasdaq: TUDO) forged ahead with its IPO despite a weak market, with the result that the stock dropped sharply on its trading debut. (previous post) The CEO of the New York Stock Exchange’s operator said in an interview earlier this week that only 7 Chinese companies went public on NYSE Euronext stock exchanges last year, a third of the 22 companies that made IPOs on its exchanges in 2010 when Chinese companies — especially in the Internet sector — were investor darlings. (English article) If current trends continue, we could see just 1 company list on the NYSE for all of 2012, which undoubtedly would be a low not seen for many years. There’s still a possibility we could see 1 or 2 other offerings proceed, especially one for Shanda’s online literature unit, Cloudary, which appears to be moving forward after the company reported a surprising profit in its latest quarter. (previous post) But if that IPO also fizzles, which is a strong possibility, look for the winter for Chinese IPOs in New York to easily continue until this fall, and quite possibly through the end of the year.
Bottom line: China Auto’s official withdrawal of its New York IPO shows the current winter for US-listed Chinese offerings continues, and could easily last through the end of the year.
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