IPOs: Canadian Solar Charges Plant Unit, Jumei Looks Homeward

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Bottom line: Canadian Solar’s Recurrent Energy unit is likely to make its first public filing for a New York IPO in the next 2 weeks and should get a positive reception, while Jumei is likely to quietly de-list from the US in the next 3-4 months.

Recurrent Energy gets big new financing

One of the few Chinese IPOs likely to happen in New York this year is moving closer to the launch gate, with word of major new financing for the power plant-building unit of solar panel maker Canadian Solar (Nasdaq: CSIQ). But while that IPO for Recurrent Energy moves closer to the IPO gate, announcement of a new privatization bid for online cosmetics seller Jumei International (NYSE: JMEI) is far more typical for the market these days.

This pair of stories reflect a growing new reality for US-listed Chinese companies. That reality is seeing some of China’s leading private companies choose New York for their listings, banking on interest from global investors seeking to buy into the China growth story. At the same time, many smaller lesser-known Chinese companies listed in New York have discovered US investors are far less interested in their stories, and are privatizing with plans to re-list and hopefully get higher valuations back in China.

Canadian Solar and Jumei quite nicely summarize this divergence. Canadian Solar is emerging as China’s best-run and most innovative solar panel maker, and has attracted strong investor interest as a result. It continued its industry-leading posture last year with its purchase of Recurrent Energy, reflecting a growing trend that is seeing solar panel makers move into power plant construction to boost demand for their products.

Late last year Canadian Solar disclosed it had submitted its first confidential filing for a New York IPO by Recurrent Energy, in an effort to separate that part of its business from its core panel-making. (previous post) Following that disclosure, the company has  announced a steady stream of new plant-building loans to show that Recurrent can secure the funding it needs to build new plants that typically cost $50 million or more.

Previous loans have been for relatively small amounts in the $30-$100 million range from big global names like RBS and Deutsche Bank, and now the company has just announced a $300 million loan from China’s own Ping An Bank. (company announcement) This particular announcement is significant for its size, and also for its source. Ping An is one of China’s more entrepreneurial major banks, and this announcement reflects a relatively big vote of confidence in Recurrent and also hints at a new plant building campaign in China.

Public Filing Coming

We have yet to see any public filings by Recurrent Energy since Canadian Solar disclosed the IPO plan in early December. But I suspect this new financing is aimed at creating more buzz around Recurrent, which is mentioned by name in the announcement. That indicates we could see the unit make its first public filing for a New York IPO to raise $100-$200 million in the next week or two.

Next there’s the Jumei story, which nicely summarizes the disappointment that many Chinese companies have felt on Wall Street after holding out big hopes for US listings. The company made its IPO nearly 2 years ago during a frenzy of new offerings, pricing its American Depositary Shares (ADSs) at $22. But after seeing an initial surge, the stock has moved steadily downward as investors lost interest, and now it trades at just $6.21.

The shares were trading even lower at $5.11 just last week, but rallied after Jumei announced a management led buyout plan to take the company private at $7 per ADS. (company announcement; Chinese article) There’s not much more to say about this deal, except that Jumei management is getting a good deal by buying its shares for one-third of their original IPO price. I expect this deal will probably close with little or no opposition, and the company will quietly bow from the US and attempt to quickly re-list on one of China’s growing number of boards for private high-growth companies.

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