IPOs: Clock Ticks Down On 55Tuan, Jiayuan

By newsdoug on March 31, 2015

Bottom line: 55Tuan’s IPO plan has a less than 50 percent chance of succeeding as a deadline looms, while Jiayuan.com is likely to de-list later this year after its investors accept a so-so buyout offer.

Time is quickly running out for a planned IPO by group buying site 55Tuan, as a deadline approaches that will nullify the company’s application earlier this year for a New York listing. Meantime, time is also running out for another Chinese Internet company, Jiayuan.com (Nasdaq: DATE), as a private equity firm launches a bid to privatize the neglected online dating site.

Both 55Tuan and Jiayuan represent a group of decidedly second-tier Chinese Internet companies that probably would have been acquired long ago in a more mature western market. But in the less developed Chinese market, the pair have managed to stay independent. The second-tier status of such firms often leads investors to question their longer term viability, dampening enthusiasm for their stocks when they list overseas.

But the big odds against it haven’t deterred 55Tuan, which was seeking a first-to-market premium when it filed in January to become China’s first group buying site to make an IPO. The company set a target listing date of February 15 in its original filings, but that date came and went without any movement. Now media are reporting the company’s original filings will expire if it doesn’t make its IPO before March 31, which happens to be today. (Chinese article)

A detailed Chinese article on the situation notes the expiry date, and also the fact that 55Tuan hasn’t attempted to publicly explain the reason for the delays or if it intends to continue with the plan. The same article points out that an English website, IPOScoop.com, says that 55Tuan is planning to make its IPO on Wednesday, April 1, which is technically 1 day after the IPO application expires and also happens to be April Fool’s Day.

I’ve had a look at that website, which erroneously lists the company by its Chinese name Wowo Ltd, and it does indeed say the listing will take place on April 1, with a price range of $9-$11 and a fund-raising target of $40-$50 million. (English website) The site lists a small investment bank called Axiom as the lead underwriter, adding to the mystery and confusion surrounding this troubled offering.

We won’t have to wait too long to see what happens to the IPO for this money-losing company, and I suspect the deal could ultimately collapse due to lack of investor interest. If that happens, it would mark the second time that 55Tuan filed for an IPO and failed to complete the deal. (previous post) That could easily spark a crisis for the company that ultimately ends with its sale at a bargain price or complete collapse.

Next let’s look at Jiayuan, which looked like an attractive company when it made its IPO back in 2011 due to its status as China’s first publicly traded online matchmaking site. But investors thought otherwise, and Jiayuan’s shares have moved steadily downward over the last 3 years and now trade at just over $5, or less than half the original IPO price of $11.

Rumors began to pop up as early as 2013 that Jiayuan was a takeover target, and earlier this month the inevitable finally happened when it received a buy-out bid from a private equity group led by a company called Vast Profit Holdings. The offer was priced at $5.37 per American Depositary Share, which marked a slight 6 percent premium over the company’s price at the time.

Now Jiayuan is saying it has hired legal and financial consultants to help it evaluate the bid. (company announcement) The company’s latest financials show it is still relatively healthy and growing at a respectable rate, though it remains quite small with quarterly revenue of just $28 million. Investors clearly have no interest in a company of this size with little or no big future potential, and I do expect Jiayuan’s days as a listed company will probably end later this year after it accepts the buy-out bid.