Bottom line: Hong Kong IPOs by Qingdao Bank and Bank of Jinzhou will debut weakly due to concerns about their bad debts, and sentiment is unlikely to improve towards regional Chinese lenders anytime soon.
Qingdao Bank IPO prices weakly
The only thing worse than a national Chinese lender is one of the country’s hundreds of smaller local banks. That’s the message coming from investors this week, as a chilly reception for a new offering from Qingdao Bank (HKEx: 3866) has forced the lender based in eastern Shandong province to slash its fund-raising plan by 10 percent. The news is a bad sign for Bank of Jinzhou (HKEx: 416), based in nearby Liaoning province, which is a few steps behind with its own IPO seeking to raise up to nearly $1 billion.
Two factors are undermining these IPOs by China’s regional banks, which have been flocking to market in the last 2 years after listings by most of the nation’s biggest lenders a decade or more ago. The most immediate factor is a resumption of IPOs on China’s domestic markets, which is set to occur next week after a half-year pause. The second is a broader issue, namely the fact that most of these lenders are sitting on mountains of questionable loans that will probably go bad in the next 1-3 years. Read Full Post…
Bottom line: Weibo’s investment in mobile video app Miaopai looks like a smart move to build on its recent momentum, while 58.com’s spin-off of its Guazi used car service is mostly a management restructuring.
58.com spins off Guazi used car site
A couple of web-related fund-raising stories are in the headlines today, though their relatively small size reflects investor sentiment that is rapidly fading towards these money-losing Internet companies. The bigger of the 2 deals has short video app Miaopai raising $200 million, in a funding round led by China’s Twitter-like Weibo(Nasdaq: WB). The second has leading online classifieds site 58.com (NYSE: WUBA) spinning off its Guazi used car businesses, in a move aimed at giving the company more flexibility to raise money for its future growth.
The $200 million figure is one of the largest we’ve seen in recent months, but is well below mega-fundings in the first half of this year when China’s stock markets were rallying and fundings of $1 billion or more were almost ordinary. But the flow of money has slowed sharply in recent months as investors get impatient for profits, forcing a number of former rivals into mergers to accelerate their drive to profitability. Read Full Post…
Bottom line: Momo may be reconsidering its de-listing plan as it approaches profitability and becomes comfortable in New York, while Shanda’s final de-listing testifies to the resourcefulness and tenacity of founder Chen Tianqiao.
Shanda NY listing nears end game
Two companies aiming to de-list from New York are in the headlines as the weekend approaches, led by word that Shanda Games (Nasdaq: GAME) is finally packing its bags and heading home after a long and difficult privatization process lasting nearly 2 years. At the other end of the spectrum is social networking app maker Momo (Nasdaq: MOMO), which was aiming to capture the record for shortest life as a US-listed company when it announced a privatization bid in June just 7 months after its Nasdaq IPO.
I’ve written quite a few times about Shanda Games’ imminent de-listing, only to see the buyout derail for different reasons. But this time it really does look final after shareholders approved a buyout deal that has now formally closed. (company announcement) Meantime, Momo has just announced quarterly results that show it is almost profitable. But what’s perhaps equally interesting is the lack of any mention of its own previously announced buyout offer in the report, which could perhaps imply a change of direction. Read Full Post…
Bottom line: Innovation Works’ China OTC IPO plan shows the year-old small-cap board is rapidly becoming a popular place to list for money-losing companies that might have previously gone to New York.
Innovation Works files for China OTC listing
China’s year-old over-the-counter (OTC) market is suddenly becoming the hot place for new listings by young tech firms, with word that the technology incubator founded by Google’s (Nasdaq: GOOG) former China head has become the latest in a recent string of companies to file for listings there. The OTC application by Innovation Works highlights a new path to market for money-losing Chinese companies that might have previously chosen to list in New York.
The main stock exchanges in China and Hong Kong don’t allow money-losing companies to list, with the result that many private start-ups used to go to New York where profitability isn’t a requirement. But New York investors are also increasingly showing lack of interest in money-losing Chinese firms, causing their shares to languish and some like online video site Youku Tudou (NYSE: YOKU) to sell themselves and de-list. Read Full Post…
Bottom line: The MSCI’s inclusion of US-listed Chinese stocks like Baidu and Alibaba in some of its emerging market indexes will support the shares by attracting more long-term investors.
Alibaba, Baidu get support from MSCI inclusion
Investors who previously looked enviously at Chinese Internet stocks but were too afraid to buy due to their volatility have new reason for confidence, with word that one of the world’s top index compilers will include the country’s top names in some of its indexes. The move by MSCI has been long overdue, and comes just months after the global index compiler disappointed China boosters by declining to allow Shanghai- and Shenzhen-listed A-shares into its emerging markets indexes.
This particular move will also come as a welcome development to people who argue that China’s best companies are better served by listing their shares in overseas markets like the US and Hong Kong rather than at home. Many Chinese Internet companies that previously listed in New York have been abandoning the market recently by launching privatization bids, with an aim of eventually re-listing in China to try for better valuations. Read Full Post…
Bottom line: Alibaba and Baidu’s inclusion in MSCI indexes and SouFun’s new dual listing in China highlight reasons why overseas markets are still an attractive place for leading private Chinese companies to list.
SouFun eyes dual listings in China, NY
Two new developments last week highlighted why overseas listings are still beneficial and even desirable for some Chinese companies, even as a flood of New York-listed firms move ahead with plans to leave New York and re-list in China.
The first development saw MSCI, one of the world’s top index compilers, say it would include Chinese companies in its products for the first time by choosing several US-listed firms, including Internet titans Alibaba(NYSE: BABA) and Baidu (Nasdaq: BIDU). The second saw investors applaud a plan by leading online real estate services firm SouFun (NYSE: SFUN) to take control of a Shanghai-listed company, a move designed to gain access to Chinese capital markets while maintaining its New York listing. Read Full Post…
Bottom line: Weak pricing for Dali Foods’ Hong Kong IPO reflects investor uncertainty about China’s economy and stock markets, though the shares could briefly rise on their debut due to support from state-backed investors.
IPO for snack maker Dali draws tepid demand
A lukewarm reception for an upcoming IPO from snack maker Dali Foods is providing the latest evidence that global appetite for Chinese offerings is still quite wobbly. Dali has cut the size of its fund-raising plan by about 20 percent, following in the footsteps of China’s oldest investment bank CICC (HKEx: 3908), which made a similar reduction for its IPO whose shares made their trading debut last week.
The weak sentiment reflects uncertainty about China’s domestic stock markets, which reflects uncertainty about the nation’s broader economy that is showing signs of slowing. Hong Kong’s stock markets have become increasingly synced with far more volatile mainland stock markets, which soared in the first half of this year, only to come crashing back to earth during a massive summer sell-off. Read Full Post…
Bottom line: China Postal Bank’s signing of several major global institutions as cornerstone investors reflects the attractiveness of conservative financial service firms as China’s economy slows.
Conservative Postal Bank draws big global investors
What’s likely to be this year’s biggest IPO has just moved one step closer to market, with word that Postal Savings Bank of China is near a deal to sell about 15 percent of itself to a group of mostly foreign investors ahead of a planned $20 billion new offering. This particular IPO will provide one of the most conservative choices yet to investors looking to buy into China’s financial services market.
That’s because Postal Bank historically served as a place for consumers to park their savings, and did little actual lending like traditional banks. That difference appears to be a major factor making Postal Bank so attractive now compared with more traditional lenders like ICBC(HKEx: 1398; Shanghai: 601398), which are standing on the cusp of a bad loan crisis as China’s economy rapidly slows. Read Full Post…
Bottom line: Tencent’s recent cash-raising frenzy probably signals a major equity investment coming in the next few months, with a merged Meituan-Dianping or Activision as the most likely targets.
Tencent raises more cash via syndicated loan
Tencent(HKEx: 700) may be the lowest-key of China’s big 3 Internet companies, but the company has been far louder on the money- raising scene by borrowing billions of dollars in cash lately. The social networking (SNS) giant has raised billions through a series of bond issues over the last year, and now looks set to raise another $1.5 billion through a syndicated loan that it’s reportedly negotiating with several major western lenders.
All this raises the question of what exactly Tencent is targeting with all the new cash. The company has been the least acquisitive of China’s big 3 Internet companies, which include itself, Alibaba(NYSE: BABA) and Baidu(Nasdaq: BIDU), amid a major consolidation in China’s Internet over the last 2 years. Read Full Post…
Bottom line: CICC and Jiuxian are benefiting from a growing number of domestic listing options for private Chinese companies, but both will still need to show they can be profitable industry leaders for investors to take them seriously.
Jiuxian finally debuts on China OTC
A couple of new IPOs are highlighting the growing allure of China’s increasingly diverse stock markets for domestic companies that used to flock to New York. Leading the headlines is a very respectable performance in the long-awaited Hong Kong trading debut for CICC (HKEx: 3908), China’s oldest investment bank. The strong debut came even after CICC had to scale back the offering due to weak demand, and market watchers are attributing the performance to separate news that China will resume domestic IPOs by year-end after a pause of several months.
In the other headline, online wine seller Jiuxian has become the latest Chinese Internet firm to list on the country’s 2-year-old over the counter (OTC) market. The loss-making Jiuxian had initially aimed to list in New York, but abandoned that plan for a simpler offering at home. It joined other money-losing startups making similar listings over the last week, including online classified ad site Baixing and Alibaba-backed (NYSE: BABA) soccer club Evergrande Taobao. (previous post) Read Full Post…
Bottom line: Two new China OTC listings for companies that may have previously chosen New York, and slow progress for Giant Interactive’s backdoor listing, reflect fading offshore interest in these companies, as more options emerge for them in China.
Money-losing soccer team plays on China’s OTC
A trio of IPO stories are in the headlines as we head into the new week, led by new listings for online classified ad site Baixing and a soccer club co-owned by Alibaba(NYSE: BABA). But unlike earlier days when these 2 IPO stories might have both surfaced in New York, both are happening on China’s recently launched modest over-the-counter (OTC) board, reflecting shifting capital raising patterns.
The third of these new IPO stories involves Giant Interactive, which was formerly listed in New York but privatized 2 years ago and is trying to return to China through a backdoor listing in Shenzhen. That story has the Shenzhen stock exchange requesting more information from Giant as it seeks to list via a company called New Century Cruises (Shenzhen: 002258). While such a request isn’t too worrisome, it does signal that the return to Chinese stock markets could be a bumpy ride for the many US-listed companies now leaving New York. Read Full Post…
