IPOs: Qunar Tries Again, Alibaba Ponders, Xiaomi Waits

Qunar relaunches IPO with Q4 target

There’s a small flurry of IPO news today, with word that Baidu-invested (Nasdaq: BIDU) online travel site Qunar has relaunched its plans for a New York public offering. At the same time, anyone who was hoping for a near-term listing for hot smartphone maker Xiaomi might have to wait a while, with word that the firm won’t make a public offering for at least the next 5 years. Lastly, no IPO story would be complete without the latest speculation on the multibillion-dollar planned listing by e-commerce leader Alibaba, as pundits speculate on its next move following a recent clash with Hong Kong stock regulators.

The biggest main theme to these 3 separate stories is that the overseas climate for IPOs by Chinese firms remains tepid, though premium names can still draw strong interest. At the same time, regulators in both the US and Hong Kong are sending clear signals that they won’t allow for many, if any, exceptions to their strict listing requirements, in a bid to keep their markets clean and transparent.

Let’s start with  Qunar, as it’s both the newest and also one of the oldest pieces of news on the IPO calendar this week. At first I thought I was reading an old headline when I saw a report that Qunar was preparing for an IPO as soon as this year’s fourth quarter, since media reported almost identical news a this time last year. (previous post) The reasons for the big delays aren’t specific to Qunar, and instead are the result of lingering cool sentiment towards Chinese firms by US investors after a series of accounting scandals.

The reports a year ago said Qunar had made all necessary preparations for an IPO by year end, following its receipt of $300 million in funding from Baidu in 2011 for a controlling stake of the company. Now the newest reports say that Qunar is aiming to raise up to $150 million in an offering that could come as soon as the fourth quarter, and the IPO is being underwritten by Deutsche Bank and Goldman Sachs. (Chinese article)

Qunar has risen quickly to challenge industry leader Ctrip (Nasdaq: CTRP) by operating a platform where third-party travel agents can sell their products. The company expects to generate about 1 billion yuan in revenue this year, mostly from advertising, which is about a quarter of what Ctrip reported in 2012. Still, the company does look like a fast riser and could attract solid investor interest if it shows it’s profitable in its first public IPO filings.

From Qunar, let’s look quickly at Xiaomi, which has been growing rapidly on the strength of its popular smartphones and recently obtained $2 billion in funding — a record for a Chinese tech company. Xiaomi said the new funding valued the company at around $10 billion, and I’d previously predicted it could make an IPO as soon as 2015 to capitalize on its rising popularity.

But now one of Xiaomi’s co-founders and President Lin Bin is saying an IPO won’t come in the next 5 years, as the company focuses on expanding its product lines and globalizing its sales. (English article; Chinese article) Frankly speaking, I think 5 years is a long time and Xiaomi would be foolish to wait so long to make an its offering if a good window opens before then. But I do think that Lin’s bigger point is that Xiaomi isn’t in a big hurry to make an offering, and can probably land at least one more mega round of private funding before any IPO.

Finally on the subject of Alibaba, I’ll just briefly mention the latest media reports that cite analysts saying New York could become the company’s favored listing venue following a tiff with securities regulators in Hong Kong, the previous preferred location. Alibaba was looking for an exception to Hong Kong listing rules that would give its management stronger control of the company, but the regulator refused to agree to the request.

I still personally believe that Alibaba will ultimately list in Hong Kong, which is becoming increasingly attractive for Chinese tech firms due to its geographic closeness to China. But such a listing could now be delayed until next year, and Alibaba is almost certain to use the threat of going to New York to try and sway the Hong Kong regulator to change its mind.

Bottom line: Qunar’s IPO is likely to come by the end of this year, while Alibaba’s could be delayed until 2014 and Xiaomi’s is unlikely before 2016.

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