New York IPO Scorecard: Still Some Life
Two weeks after this year’s first Chinese IPO in New York, there’s still a bit of life left in the market despite recent signs of slowing momentum. That’s my quick assessment after looking at the performance of the 4 companies to list so far this year, starting with education services firm Tarena (Nasdaq: TEDU), followed by clinic operator iKang (Nasdaq: KANG) and finally online real estate services firm Leju (NYSE: LEJU) and microblogging giant Weibo (Nasdaq: WB). Meantime, media are reporting that this year’s most highly anticipated IPO from Alibaba is getting delayed, after reports emerged last week that the e-commerce giant could make its first regulatory filing for a New York offering this week.
The IPO season in New York began early this year, as Chinese companies rushed to take advantage of a window of strong sentiment that opened in the second half of 2013. Tarena became the unlikely first Chinese firm to make a New York IPO this year with its offering in early April. Since then its shares have sagged, and are now trading 14 percent below their IPO price. The second company to list was iKang, and its shares are also now trading about 4 percent below its IPO price.
The picture looks slightly better for Leju and Weibo, which became the first technology plays to list this year when shares for both debuted last week. Shares of both companies got off to rocky beginnings after both were priced at the very bottom of their indicative range. Weibo also had to sharply cut the size of its original plan after meeting with weak demand from big institutional investors. But after that disappointing performance, shares of both companies have performed quite well since their trading debut.
Leju’s shares now trade 18 percent above their IPO price. Weibo shares have surged an even more impressive 33 percent, including a 12 percent rise on their second trading day after the Good Friday holiday in New York. That kind of gain was common for stocks that debuted during the boom in the last 2 months of 2013, but was absent in the flurry of listings so far this year as the market started to become saturated.
Quite a few other companies are still waiting to list, including e-commerce companies Jumei and JD.com, which have filed to raise up to $400 million and $1.5 billion, respectively. The granddaddy of the listing candidates, Alibaba, was also reportedly set to make its first IPO filing this week, after earlier making the surprise decision to list its shares in New York rather than its previous preference for Hong Kong.
But now media are saying the e-commerce leader, which could raise up to $15 billion in its offering, may delay the filing of its initial F-1 form while it makes some adjustments to its Taobao B2C platform. (Chinese article) This kind of adjustment sounds quite typical, especially for a company of Alibaba’s size, and I doubt the delay has any huge significance about the bigger implications for the offering.
In terms of the broader IPO market, the performance of the 4 companies to list so far does seem to indicate there is still some interest in China tech stocks, especially among smaller investors. That means companies looking to make smaller offerings of $150 million or less could still get a positive reception, especially if they’re profitable and have a good growth story. Non-tech companies like iKang and Tareda could face more difficulty. Large offerings like JD.com could also be forced to scale back their fund-raising plans due to waning interest from the largest institutional investors, which seem to be losing their appetite for China tech firms.
Bottom line: China tech firms seeking to raise $150 million or less in New York IPOs could still perform relatively well, while non-tech and bigger offerings could face some headwinds.
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