IPOs: Baozun Downsizes, Jumei Jumps on Buyout Talk
Bottom line: Baozun’s IPO is likely to price in the middle of its range and debut flat despite its strong credentials, as waning sentiment towards Chinese Internet companies may prompt other recently listed names like Jumei to launch privatization bids.
Sentiment towards China-listed US firms continues to show signs of weakening, with word that e-commerce website designer Baozun has had to scale back its IPO in New York as its shares move closer to their trading debut. Meantime, shares have jumped over the last week for e-commerce firm Jumei International (NYSE: JMEI), amid talk that it may be considering a privatization bid to re-list back back in China.
Both stories reflect a recent trend that has seen a growing number of second-tier Chinese Internet companies abandon New York listings due to lack of investor interest. Many are believed to be eying re-listings in China, where their names are better known and companies of all types have achieved lofty valuations these days during a stock market surge that has seen shares double since a rally dating back to last summer.
This privatization trend has seen the recent completion and pending privatizations of a wide range of firms, including the latest management-led plans to buy out online game operator Perfect World (Nasdaq: PWRD) and drugmaker WuXi PharmaTech (NYSE: WX). But the attraction of China as an alternate listing site could quickly vanish if and when the current rally in the country’s domestic stock markets ends, which seems likely to happen soon. When that happens, New York may once again look like the most attractive option for these fast-growing venture-funded Chinese companies.
All that said, let’s look more closely at the Baozun IPO, which will become only the second major listing by a Chinese company in New York this year after a much busier wave of new offerings in 2014. Baozun has set a price range for its shares at $12 to $14 per American Depositary Share (ADS), and plans to make its final pricing next week. (English article; Chinese article) It plans to offer 11 million shares, meaning it could raise up to about $150 million and be valued at up to $775 million.
I previously said the offer looked relatively exciting, as it counted 3 top brokerages, Morgan Stanley, Credit Suisse and BofA Merrill Lynch, as its underwriters. Baozun is also backed by e-commerce giant Alibaba (NYSE: BABA), and has a strong list of top-tier customers including Nike (NYSE: NKE), which have hired it to design their China-based e-commerce sites. Yet despite all those points in its favor, the maximum fund raising target of $150 million is well below the company’s original target of up to $200 million. (previous post) That would indicate the offering has met with lukewarm demand despite its good prospects, which could bode poorly for future offers in the months ahead.
Jumei, Chinese cosmetics E-Commerce leader
Meantime, shares of online cosmetics seller Jumei have shot up 17 percent this month, including a 14 percent rise last week alone, on talk that the company could become the latest buyout candidate. Jumei shares initially jumped after their IPO a year ago, but have languished this year amid cooling enthusiasm and broader concerns that many Chinese e-commerce sites may have large volumes of counterfeit goods trading over their platforms. Before last week’s rally Jumei’s shares were trading near their IPO price of $22.
There’s not much in the headlines about a buyout plan, though one report says the company is planning to re-list in China. It doesn’t provide any more details or give a source for the information. (English article) A buyout so soon after its New York IPO wouldn’t be completely unprecedented, since mobile game developer Sungy Mobile (Nasdaq: GOMO) also recently announced a privatization plan just over a year after its own listing on the Nasdaq. (previous post) All this hints that the privatization wave could be picking up steam, and we could even see more recently listed companies like Sungy consider buyouts and re-listings in their home China market.
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