Lashou Ropes in Small Potatoes For US IPO 拉手网聘二流承销商赴美上市

By newsdoug on October 4, 2011

Lashou goes shopping for i-bank Turmoil and discord continue to plague the online group buying space, with industry leader Lashou taking a dubious step in its struggle to make an IPO before the market collapses by hiring a couple of second-tier investment banks to underwrite the offering. Reuters is reporting the company has hired leading Chinese investment bank CICC and top Japanese investment bank Nomura to lead the New York offering to raise $100-$200 million (Chinese article). The hire comes after Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) abruptly resigned from the case last month due to concerns over accounting records at some of Lashou’s recent acquisitions, and after another leading group buying site, 55tuan, reportedly failed to find an underwriter for its planned IPO for similar reasons. (previous post) I applaud Lashou for its tenacity in making an IPO; but it’s also painfully apparent the company had to resort to CICC and Nomura after the first-tier US and European investment banks all shunned the deal. Neither CICC nor Nomura has particularly strong ties to US investors, which means that Lashou’s IPO, if it really goes ahead, will face an uphill battle attracting investors to this offer from a sector in crisis. The turmoil first surfaced earlier this year when Gaopeng, the group buying joint venture between US group buying pioneer Groupon and Tencent (HKEx: 700) launched mass layoffs. Groupon.cn, a China competitor unrelated to US-based Groupon, has also reportedly laid off many employees (Chinese article); and 55tuan itself has also started some layoffs, though the company has denied gossipy reports that it was laying off up to 70 percent of its staff. (English article) A sector in so much turmoil will hardly be attractive to US investors, who are already wary of Chinese companies due to several recent high-profile accounting scandals. That said, and considering the weakness of Nomura and CICC in this space, I would look for Lashou’s IPO to price at the low end of its range and ultimately raise less than the minimum $100 million it is targeting, as investors avoid this highly problematic offering — if it even makes it to market at all.

Bottom line: Lashou’s upcoming New York IPO is likely to attract little or no investor demand due to weak underwriters and turmoil in China’s ultra-competition group buying space.

Enjoy this blog? Please spread the word :)