IPOs: Spring In Shanghai, Cheetah In NY, Football In London
A flurry of IPO news is in the headlines as we start this new week, including more troublesome signs from New York for an upcoming tech IPO, and a potentially exciting new offering in Shanghai from China’s leading budget airline. Meantime, another quirky piece of IPO news is making headlines with word that a Sichuan-based soccer club is aiming for an eventual listing in London. The 3 companies involved in these news bits, respectively, are security software maker Cheetah Mobile, budget carrier Spring Airlines and the Sichuan Leaders soccer club.
Among these 3 news bits, the most worrisome and also the one closest to making its listing debut is Cheetah Mobile, the security software division of Kingsoft (HKEx: 3888), one of China’s leading private software companies. Media are reporting that Cheetah has set the price range for its IPO at $12.50 to $14.50 per American Depositary Share (ADS). (Chinese article) But the worrisome part is Cheetah’s fund raising target, which now stands at a maximum of $200 million — a sharp drop from its previous target of up to $300 million.
The scaling back of Cheetah’s offering would come after Sina’s (Nasdaq: SINA) Weibo (Nasdaq: WB) microblogging unit was forced to cut its IPO by nearly half less than 2 weeks ago. Weibo ultimately raised $286 million, versus an original target of up to $500 million, after pricing its shares at the very bottom of their range. A pricing at the bottom of its range could mean Cheetah would ultimately raise just $170 million or even less, and I do suspect that could be the case as the recent enthusiasm for Chinese tech IPOs continues to wane in New York.
Meantime, Spring Airlines has announced plans for its own IPO in Shanghai to raise up to 2 billion yuan, or about $400 million. (English article) The move would mark Spring’s latest attempt to launch a domestic IPO, following a series of failed efforts dating back to 2009. The timing of this latest announcement comes as China has just resumed new domestic IPOs following a 14 month freeze to support the nation’s sagging stock markets.
As a frequent air traveler I’m not a huge fan of Spring, mostly because I dislike budget airlines in general for their cattle-like treatment of passengers. But the company has earned a reputation as a well-run and reputable carrier in its short history, and is one of the few truly private choices in a sector dominated by big state-run firms. Its base in Shanghai means it’s probably also well connected with the nation’s securities regulator, which is also based in the city, and that it could get preference among the hundreds of companies waiting to make IPOs. If that happens, this could be one of the more interesting and exciting new offerings to watch.
Finally let’s look at Sichuan Leaders, which really isn’t too exciting as an IPO but is more interesting for its quirkiness and uniqueness. According to Chinese media reports, Leaders held a press conference last week to announce its plan, which would initially see it list on the Bermuda Stock Exchange as early as June. (Chinese article) The club would then apply for an upgrade to the London Stock Exchange at the earliest possible time, officials said at the event.
I personally don’t closely follow Chinese soccer, but know that most teams are losing big money due to lack of revenue sources and a tarnished image following a steady stream of corruption scandals. Still, I have to imagine a day will come when the league finally finds an audience, since many Chinese are big soccer fans. I have to credit Leaders for its creativeness in pursuing this IPO, which indeed looks ahead of the curve as it would become the first club to get such a listing. But that said, I have serious doubts about whether this IPO plan will actually happen, and even if it does I wouldn’t expect much from the stock for at least the next few years.
Bottom line: Cheetah Mobile’s IPO is likely to price at the bottom of its range and debut weakly, while Spring Airlines’ IPO could perform better as it heads towards a listing in Shanghai.
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