NY Listings: Cloudary Sinks, 7 Days Disappears
US stock markets have lost yet another Chinese company with word that hotel operator 7 Days (NYSE: SVN) has successfully privatized, but could soon gain another member amid signs that online literature provider Shanda Cloudary may be preparing to restart its long-stalled IPO process. These 2 cases show companies moving in very different directions, but do seem to indicate that public listings in New York remain an important money-raising option for profitable, Chinese tech firms with big growth potential.
Non-tech firms have had a much harder time on US stock markets these days, which is one of the main reasons why 7 Days launched its privatization bid last September. (previous post) Under the deal, a management-led group offered to buy back all of 7 Days’ American Depositary Shares for $12.70 each, representing a premium of more than 20 percent to its stock price at the time. It later raised the price to $13.80 per ADS. The deal was backed by private equity firms Carlyle and Sequoia Capital, which believed 7 Days’ shares were undervalued.
Now 7 Days has announced that it has successfully completed the privatization, and that its shares will cease to trade on the New York Stock Exchange as of Monday, July 8. The shares finished their final trading day in New York last Friday at $13.79, valuing the company at just under $700 million. Their disappearance will leave larger rivals Home Inns (Nasdaq: HMIN) and China Lodging Group (Nasdaq: HTHT) as China’s 2 remaining US-traded hotel companies.
So what’s likely to happen next for this group of hotel operators? I wouldn’t be surprised to see 7 Days sold in the next year to either Home Inns, China Lodging, or perhaps another Chinese hotel operator like Jin Jiang (Shanghai: 600754) for up to $1 billion, as a continuation of the ongoing consolidation in China’s hotel industry.
From 7 Days, let’s move on to Cloudary, which has been trying to make an IPO for 2 years now but has run into numerous problems. The company was forced to scrap its original IPO plan about 2 years ago at the beginning of a sharp downturn in investor sentiment toward US-listed Chinese firms due to a series of accounting scandals. It made a second attempt last year, only to delay the plan once again due to lingering weak sentiment.
Many believed the company would relaunch its IPO plan early this year, but then Cloudary was hit by a sudden defection of a major group of top managers at its core Qidian unit. Cloudary has been working hard since then to fill that hole, and now media are reporting the company has just raised new funds by selling 20 percent of itself to investment banking giant Goldman Sachs (NYSE: GS). (Chinese article)
The reports point out that Goldman’s deal values Cloudary at around $600 million, quite a bit less than the $800 million was worth when it sold a small stake to another investor about a year ago before its second aborted IPO attempt. (previous post) I’m not too surprised that Cloudary’s valuation dropped after the crisis at Qidian, though the magnitude of the fall is a bit large, meaning the company has lost more than a quarter of its value.
Still, the sale to Goldman purchase seems to indicate that Shanda still wants to move ahead with the IPO sooner rather than later. This kind of late-stage strategic investment usually comes within a half year of an IPO, and I expect we’ll see Cloudary file for its offering by September or October. I would expect it could finally succeed in its third attempt at a New York IPO, though it’s far from clear if this promising but problem-plagued company will attract very much attention from investors.
Bottom line: 7 Days could get sold within a year following its privatization, while Shanda Cloudary is likely to finally list in New York by year end.
Related posts:
