The long-awaited spring for New York IPOs by Chinese tech firms is quickly gaining momentum, with online lottery site 500.com and app developer Sungy Mobile making their first public filings for new listings. At the same time, online classified advertising site 58.com has provided new data on its first-ever profits as it prepares to list next week. While this sudden flood of offerings looks good for Chinese tech firms that have been waiting up to 2 years to list, the mini-rush also carries the risk of diluting investor attention and dampening demand for some of the smaller players.
All that said, this swell of new offerings is mostly good news for a sector that has suffered from an investor confidence crisis that began more than 2 years ago after a series of accounting scandals at several listed companies. Since then, the US securities regulator has worked hard to clean up the market of problematic companies. Its efforts, including a landmark information-sharing agreement with the Chinese securities regulator, are finally bearing fruit as investor interest finally returns to the market. But it’s important to note that most interest remains focused on profitable firms and sector leaders, with money-losers and smaller firms still a tough sell.
Let’s start with 500.com and Sungy, which have become the 2 latest companies to make their first public filings for New York listings. They join 58.com and online travel site Qunar, which are in the price-setting range of their IPOs and are reportedly set to make trading debuts on October 31 and November 1, respectively.
I’ve previously written about 500.com, after media reported in August that the company was hiring investment banks with plans to raise up to $150 million by year end. (previous post) The plan has now moved forward, and the latest reports say the company still aims to raise $150 million with a listing on the New York Stock Exchange. (English article) 500.com posted a relatively modest $33 million in sales for the 12 months through September, though there’s no word of whether it’s profitable. Deutsche Bank and Piper Jaffray are acting as underwriters. Both banks are certainly experienced at Chinese IPOs; but neither is among the top tier banks for such listings, which could somewhat dampen demand.
Meantime, Sungy has filed for a relatively modest $80 million IPO on the New York Stock Exchange. (English article; Chinese article) The company posted revenue of $41 million for the 12 months through June, though again there’s no word of whether it is profitable. In this case, the heavier-hitting JPMorgan and Credit Suisse are underwriting the deal, which indicates the offering may attract a bit more interest and the size could even grow if demand is strong.
I’ll close out this IPO roundup with one final report that says 58.com’s has added some information to its filings, including word that it posted an $8.5 million profit in the third quarter of this year. (Chinese article) Previous reports had indicated the company recently turned profitable, but this is the first time we’re seeing the actual size of the profit. In terms of performance from this group of IPO candidates, I would expect the strongest showings from 58.com and Sungy, with the latter potentially raising the size of its offering. Qunar and 500.com could also do well, though we’ll have to see the size of their profits or losses before making a final assessment.
Bottom line: 58.com and Sungy should perform well in their upcoming IPOs, while Qunar and 500.com could do well if they show good profit potential in the near future.