China’s answer to Craigslist surges on US debut

Last updated: October 31, 2013 3:01 pm

China’s answer to Craigslist surges on US debut

By Pan Kwan Yuk and Arash Massoudi in New York

The door is not exactly being kicked wide open, but after two years of accounting scandals and critical reports from shortsellers, Chinese companies are slowly making their way back to Wall Street. 58.com, China’s answer to Craigslist, surged almost 40 per cent to $23.69 with US investors showing their appetite for the company as it made its debut on the New York Stock Exchange on Thursday. The company, which was founded in 2005 and booked $107m in sales for the 12 months to June 30, raised $187m from its initial public offering after pricing its shares at $17 each.The strong first day gains came despite the company having twice raised the expected price range of its IPO.

58.com’s listing comes as an increasing number of Chinese internet companies hope to take advantage of the strong US equity markets.

Qunar, a popular travel website owned by Baidu, is looking to raise as much as $155m when it goes public on Nasdaq on Friday. Others waiting in the wings include 500.com, China’s leading online sports lottery service provider, and Sungy Mobile, a mobile app developer.

Both companies last week filed plans with the US Securities and Exchange Commission to raise up to $150m and $80m respectively through IPOs.

The deals, while small, are a sign that the freeze on Chinese IPOs in the US could be thawing.

Between 2009 and 2011, 67 Chinese companies went public in the US and raised a combined $8.26bn. But Chinese IPOs collapsed in 2012 after allegations of financial fraud and accounting issues at some Chinese groups, particularly those that went public in the US through reverse mergers, came to light. The crisis of confidence that followed weighed heavily on the shares of US-listed Chinese companies.

The Bloomberg China-US Equity Index, which tracks the 55 most-traded Chinese shares in the US, fell 58.5 per cent in the space of five-and-a-half months in 2011.

Some smaller Chinese companies have seen their shares decline so much that they have delisted or been taken private by mainland Chinese banks or private equity groups.

Aside from the buoyant US stock markets, recent sentiment for Chinese companies has been helped by the successful debut of the two Chinese companies that listed last year.

Vipshop – an online flash sales retailer that, similar to Vente Privée in France or Gilt in the US, sells branded products at a discount – has seen its shares rise more than 935 per cent since its IPO last March.

People are getting impatient for growth so anything that has high revenue growth is getting bid up

– Senior equity capital markets banker

Having debuted at $6.50 a share, the stock is now trading at $67.31. Shares in YY, a social gaming portal, are up 352 per cent at $47.50 since it went public last November, while Montage Technology Group, a Shanghai-based computer chipmaker, has seen its shares rise more than one-third since it listed last month.

One notable absence from this trend has been LightInTheBox. Priced at $9.50 a share at the time of its IPO, shares in the Beijing-based e-commerce company are now trading at $9.34.

While the “risk-on” appetite in the market at the moment means investors are more willing to take a chance on small Chinese companies, particularly those in the technology and internet sectors, there is still scepticism towards these companies.

“I would attribute the demand for this deal to be driven from interest in the tech sector rather than for Chinese companies,” said one senior equity capital markets banker. “People are getting impatient for growth so anything that has high revenue growth is getting bid up.”

 

58.Com Jumps in U.S. Debut as China’s Craigslist Appeals

By Belinda Cao – Oct 31, 2013

58.Com Inc. (WUBA), a Craigslist-like Chinese online marketplace, jumped on its first day of trading after raising $187 million in the biggest U.S. debut by a Chinese company this year.

American depositary receipts of the Beijing-based classifieds website surged 41 percent to $24.03 at 10:22 a.m. in New York. The company sold 11 million ADRs for $17 apiece, according to its statement, higher than its initial target range of $13 to $15, which was later raised to $15 to $16. Morgan Stanley, Credit Suisse Group AG and Citigroup Inc. were lead managers of the sale.

The sale became the fourth and biggest initial public offering by a Chinese company in the U.S. this year, after web retailerLightInTheBox Holding Co. (LITB) raised $78.9 million in June, followed by China Commercial Credit Inc. and Montage Technology Group Ltd. The number of offerings has rebounded from a low of three in 2012 and is down from the 13 in 2011, data compiled by Bloomberg show.

Travel-booking website Qunar Cayman Islands Ltd. increased its IPO target price by as much as 26 percent yesterday, while online sports lottery operator 500.com Ltd. filed for a $150 million IPO Oct. 22.

The number of share sales have dropped from 38 in 2010, as allegations by short sellers such as Muddy Waters LLC against Chinese targets have deterred companies from selling shares in the past two years.

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