Wedding Gown in-a-Box Slump Risks Cutting Prices for IPOs

Wedding Gown in-a-Box Slump Risks Cutting Prices for IPOs

By Belinda Cao  Aug 26, 2013

The 48 percent slump in LightInTheBox Holding Co. (LITB), the Chinese online discount retailer that sold shares in the U.S. this year, risks reducing the price for the nation’s companies seeking to go public, IPOX Schuster LLC said. American depositary receipts of LightInTheBox plunged below their June 6 debut level last week, after the Beijing-based company said sales will decline. The ADRs posted the biggest slump on the Bloomberg China-US Equity Index of the most-traded Chinese stocks. The measure added 0.7 percent last week, led by NetEase Inc. (NTES) and Trina Solar Ltd. (TSL) China Telecom Corp. traded at the biggest premium to the Hong Kong shares in two weeks.LightInTheBox, whose $80 wedding gowns and $2 iPhone gadgets are manufactured in China and sold in the U.S. and Europe, reported on Aug. 19 second-quarter sales that failed to surpass analysts’ estimates and said revenue will decline in the following three months. The earnings miss could reduce future IPO prices at a time Baidu Inc.’s travel unit Qunar.com and operator of literary websites Cloudary Corp. plan to sell shares in the U.S., according to IPOX.

“It’s definitely going to affect perceptions about Chinese IPOs in the U.S.,” Josef Schuster, the founder of IPOX, an investment firm based in Chicago with about $2.5 billion under management, said by phone Aug. 23. “If you don’t meet your revenues promise, you get your multiples slashed, that’s what happened with LightInTheBox. I am 100 percent sure it’s going to affect all the IPO pricing going forward.”

‘Different Animal’

Bill Zima, LightInTheBox’s external investor relations manager at ICR Inc., wasn’t available by telephone or e-mail Aug. 23.

Vipshop Holdings Ltd. (VIPS), an online fashion retailer based in Guangzhou that listed in the U.S. in March last year, has multiplied its IPO price sixfold to $40.47 as of last week. YY Inc. (YY), a social media website also based in Guangzhou, has more than tripled since its IPO in November.

LightInTheBox’s ADRs plunged to $9.87 last week following a four-day slide. After pricing at $9.5 per ADR, it jumped as much as 134 percent to $22.21 on Aug. 14.

LightInTheBox probably surged initially “because Vipshop has done so well as it met revenue targets and is very successful in the secondary market,” according to Schuster. “LightInTheBox is a different animal.”

Second-quarter revenue at LightInTheBox was $72.2 million, 4.7 percent short of the average estimate of four analysts compiled by Bloomberg. It forecast in an Aug. 19 statement sales for July-September that also missed average projections by as much as 14 percent. Credit Suisse Group AG downgraded the company’s rating to the equivalent of sell last week.

Hang Seng

The Shanghai Composite Index rose 1.4 percent to 2,086.49 at 12:02 p.m. local time after benchmark gauges fell last week. The Hang Seng China Enterprises index of Hong Kong-listed Chinese companies climbed 1.8 percent.

The iShares China Large-Cap ETF (FXI), the largest Chinese exchange-traded fund in the U.S., slipped 1.4 percent last week to $35.66, losing the most in seven weeks. The Standard & Poor’s 500 Index added 0.5 percent in its the first weekly gain in three weeks, as investors watched Federal Reserve officials for signals on stimulus cuts after data showed home sales plunged.

NetEase, owner of a Chinese news portal, soared 19 percent in the five days to a record high of $75.42, the biggest weekly gain since February 2006.

The Beijing-based company started Yichat, a social instant messaging application last week, through a joint venture with China Telecom, the nation’s third-largest wireless network carrier. Downloads surpassed 1 million in the 24 hours after the application was introduced, China Telecom said.

China Telecom

China Telecom climbed 3.5 percent last week to a three-month high of $52.90. Its ADRs, each representing 100 underlying shares in Beijing-based China Telecom, traded 0.8 percent above its Hong Kong stock, the widest premium since Aug. 8.

Trina Solar, China’s third-largest panel maker, jumped 32 percent last week to $9.44, the steepest weekly advance this year. Yingli Green Energy Holding Co. rallied 13 percent for the week while LDK Solar Co. gained 10 percent.

Trina raised its annual shipment forecast Aug. 20 after sales climbed to a record in the second quarter thanks to Asian demand. Pavel Molchanov, an analyst at Raymond James & Associates Inc. upgraded Trina to a hold equivalent Aug. 23, saying China is “on the cusp” of becoming the top driver of global photovoltaic demand.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: