IPOs: Legend Eyes HK, Xunlei New York

Legend Holdings eyes HK IPO

The recent window of positive sentiment towards Chinese tech firms continues to fuel a wave of offshore IPO plans, with video sharing site Xunlei and Lenovo (HKEx: 992) parent Legend Holdings the latest subjects of new listing rumors. All these reports come as a top New York Stock Exchange executive predicts 15-20 Chinese firms will list in New York this year. (English article) That forecast by David Ethridge, a senior vice president at NYSE Euronext, certainly looks quite bullish, especially compared with only 6 companies that listed in New York last year and just 2 in 2012. But it’s also worth noting the figure is a bit more conservative than another forecast earlier this month from an unnamed investment banking source for as many as 30 New York listings this year. (previous post)

No matter how you look at it, 2014 has gotten off to a very fast start for New York IPOs by Chinese companies, following the super-charged debuts for 5 major Internet firms that listed on the NYSE and Nasdaq in late 2013. The first quarter of the year is typically a quiet period for new IPOs due to the Christmas and Chinese New Year holidays, but just the opposite has been true this year.

In just the first 2 months of 2014 alone, we’ve gotten word that Sina (Nasdaq: SINA) has hired investment banks for a listing for its Weibo microblogging service to raise up to $500 million, and that e-commerce giant JD.com is planning an IPO to raise up to $1.5 billion. Others rushing toward the IPO finish line include online cosmetics seller Jumei, with a plan to raise up to $600 million, and Tuniu, an online travel agent. Now we’re getting word that Xunlei, one of the last major independent video sharing sites, is also gearing up for a New York IPO. (English article)

Attribution in the Xunlei reports isn’t too strong, with unnamed industry sources saying the company has just raised $25 million from savvy smartphone maker Xiaomi and is planning a New York IPO in the second or third quarter of this year. Xunlei previously tried to list at least twice in New York, but both times had to abort the plan due to weak investor sentiment. I personally don’t believe that Xunlei has the resources and depth to survive as an independent company, and wouldn’t be surprised if this IPO plan never comes to fruition. Instead, a more likely outcome is that the company gets bought by a larger firm like Xiaomi or perhaps leading Internet company Tencent (HKEx: 700).

From Xunlei let’s look quickly at the other set of reports that say Legend Holdings is eying a Hong Kong IPO as soon as later this year. (Chinese article) The basis for the reports is a series of filings that Legend has made with various provincial authorities that must give their approval before the company can formally launch its IPO process. The fact that it has submitted such reports seems to indicate that Legend, which owns a wide array of businesses in addition to Lenovo, would like to make an IPO later this year.

Legend has been saying for a while now that it wants to list. The company previously said it wanted to make an IPO by 2016, though a year ago founder Liu Chuanzhi said he wanted to accelerate that plan to as early as 2014. One of the biggest twists in the latest report is the choice of Hong Kong for the new listing, since Liu had previously said he wanted to make his IPO in either Shanghai or Shenzhen. I would expect that the listing could be quite large, potentially raising up to $3 billion; but I also question how popular the offering will be, since Legend’s assets are quite varied and its core Lenovo PC business is in an area with limited growth potential.

Bottom line: Lenovo parent Legend Holdings could raise up to $3 billion in a Hong Kong IPO as early as later this year, though the offering is likely to get a lukewarm reception.

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