Qunar Joins Year-End IPO Queue 去哪儿网有望年底赴美上市

We’re seeing growing signs that a mini-parade of Chinese IPOs could march through New York in the last 2 months of 2012, with word that online travel site Qunar hopes to list in the US by the end of the year. (Chinese article) If the reports are true, Qunar would join a small but growing list of Chinese companies that could make US listings by year end, with video sharing sites operated by Xunlei and Sohu (Nasdaq: SOHU) also sending similar signals. (previous post) If these listings go well, we could even see one of the shakier companies that has been waiting patiently to make a listing quickly move forward with an IPO, with online clothing retailer Vancl the most likely candidate in this category.

This year-end flurry of listings would mark a positive end to what has otherwise been a miserable year for US-listed Chinese firms. This group of companies was once a darling of investors who were keen to buy into the China growth story; but sentiment turned sharply negative starting in spring of 2011 when a series of accounting scandals emerged at names like Longtop Financial and Sino-Forest. Several companies tried to make US IPOs earlier this year, including names like China Auto and Shanda Cloudary, only to scrap their offerings due to dismal investor sentiment.

The only major company to make a major IPO this year has been discount online retailer Vipshop (NYSE: VIPS), which listed its shares in March, only to see them plummet by more than 30 percent in their first few weeks of trading. But the company’s stock has come roaring back since September, and its shares now trade at around $10, or more than 50 percent above their IPO price. Vipshop’s sudden reversal must be all the more encouraging for other Chinese IPO candidates because the company is still losing money, although its net loss is rapidly shrinking.

So against all this backdrop, let’s return to Qunar, which has reportedly made all the necessary preparations for an IPO by the end of the year, according to the latest media reports. The company made headlines last year when it received a $300 million investment from leading search engine Baidu (Nasdaq: BIDU) in exchange for a controlling stake of the company. (previous post) We won’t know if Qunar is profitable or money-losing until it makes its first public filings.

But one thing that is clear is that the company is operating in an increasingly competitive online travel services space, where it is competing with much older rivals like Ctrip (Nasdaq: CTRP) and eLong (Nasdaq: LONG), as well as newer start-up services from companies like e-commerce giant Jingdong Mall. Growing competition is starting to show up in companies’ bottom lines, with Ctrip reporting shrinking margins and profits in its latest quarter and warning of more to come.

But fierce competition has become relatively normal for China’s Internet, so perhaps that’s not a major concern for investors right now. In fact, another Chinese Internet firm called YY also made its first public filing for a New York IPO earlier this month. (previous post) Clearly many of these Chinese firms are in need of cash, and know that if they don’t make offering by the end of this year that they will probably have to wait until after Chinese New Year to try again. Accordingly, look for at least one of these firms to make an offering by the end of November, which could be quickly followed by 3 or 4 others if investor reception is neutral to positive.

Bottom line: Online travel site Qunar has become the latest Chinese firm to show interest in a New York IPO by year-end, perhaps marking the end to the winter for US-listed Chinese stocks.

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This article was first published in the online edition of the South China Morning Post at www.scmp.com.

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