Simcere to De-List, Vipshop Adds Shares 先声药业退市唯品会增发 冰火两重天
A week after shares of Internet portal Sohu (Nasdaq: SOHU) went on a roller coaster ride on rumors of a de-listing plan that the company later denied, we’re getting word that drug maker Simcere Pharmaceutical (NYSE: SCR) is launching the latest privatization plan by a US-listed Chinese firm. In related news, media are also reporting that online game operator The9 (Nasdaq: NCTY) is also considering such a plan. But red-hot e-commerce firm Vipshop (NYSE: VIPS) is moving in the opposite direction, announcing a plan to sell more shares to raise up to $180 million. These very different tales show that overseas investors have become quite choosy toward Chinese companies in the current climate, richly rewarding a few fast-growth players while largely ignoring most others.
Let’s start things off with Simcere, which has become the latest in a growing list of neglected US-listed Chinese firms to announce a privatization plan. (company announcement) Under terms of its buy-out proposal, Simcere shareholders would get $9.56 for each of their American Depositary Shares (ADSs), representing a 20 percent premium to their last close before the announcement.
Simcere shares shot up 16 percent to $9.25 after the deal was announced. The relatively big gap between the closing price and offer price means there is still some investor skepticism that this kind of privatization deal can close. One of the first such privatization bids from online entertainment firm Shanda Interactive took a while to close after the original offer, and another bid by outdoor advertising specialist Focus Media (Nasdaq: FMCN) is still waiting to close more than half a year after the original announcement. (previous post)
Both of those deals may have run into trouble due to their massive size, as each company had a market capitalization in the $4-5 billion range at the time of their offers. By comparison, Simcere might have an easier time since its market cap is much smaller, at around $500 million.
The story with Simcere is really quite disappointing, as the company offered a nice bet on China’s fast-growing pharmaceutical industry. Simcere’s shares traded as high as the $16 range back in 2008, but are now at about half that level and show no signs of going anywhere as investors have become indifferent to the stock.
Other Chinese companies are facing similar indifference, as investors avoid their stocks due to their high volatility and also doubts about the quality of their bookkeeping due to a series of accounting scandals in 2011. Other companies to privatize over the last year include Hong Kong-listed Alibaba.com, and US-listed Grentech, while hotel operator 7 Days (NYSE: SVN) is also in the process of privatizing.
Meantime, Chinese media are reporting that The9, a former high-flyer in the online game space, is meeting with investors and private equity firms to discuss a potential privatization. (Chinese article) I wouldn’t be surprised at all if the reports were true, since The9 has been largely ignored by investors for several years since it lost its license to offer the popular World of Warcraft game.
Trading of the company’s shares in New York is anemic, and its tiny market cap of just $80 million would make it an easy candidate for such a privatization. The9’s shares closed down 1 percent on Monday, perhaps because even the short-term stock buyers no longer pay attention to the company.
Finally, let’s take a look at Vipshop, whose shares have become red hot over the last few months as the company became one of China’s few publicly listed e-commerce firms to earn a profit. Media are reporting that Vipshop, which raised a meager $70 million in its New York IPO a year ago, will sell an additional 6 million ADSs to raise up to $180 million. (Chinese article) Vipshop shares shot up 6 percent on the news to re-approach a recent all-time high. The reaction indicates there’s still plenty of appetite for this company, making it one of the few Chinese stocks to earn investor favor.
Bottom line: A new de-listing bid by Simcere Pharmaceutical and rumored similar plan by The9 show that overseas investors remain indifferent toward all but a few high-growth Chinese firms.
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This article was first published in the online edition of the South China Morning Post at www.scmp.com.
