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VIPSHOP latest Business & Financial news from Doug Young, the Expert on Chinese E-Commerce Companies

Debut Offshore IPO Looks Weak, But Not So Bad 阳光油砂上市首日表现差强人意

By newsdoug on March 2, 2012

Sunshine Oilsands Sees Strength in Weak Debut When is a 3 percent decline in the first trading day for a newly listed company a good thing? The answer is: When you’re debuting into one of the weakest IPO markets for Chinese companies listing overseas since the global financial crisis of 2008. I find it interesting that media reports are calling the Thursday debut for Sunshine Oilsands (HKEx: 2012) weak, after shares of the China-invested Canadian energy firm fell 3 percent on their first trading day as they became the first major Chinese IPO in an overseas market for 2012. (English article) I say that because the debuts for most Chinese firms listing overseas have been far worse in the last few months, amid a confidence crisis following a series of accounting scandals for US-listed Chinese firms starting nearly a year ago. The height of the crisis saw a number of firms delay their US and Hong Kong IPOs last fall, as investor sentiment tanked. Online video specialist Tudou (Nasdaq: TUDO), one of the few companies that went ahead with its New York IPO despite the terrible sentiment, saw its share tumble nearly 12 percent on their first trading day in August, and new offerings have disappeared since then. So against that backdrop, a 3 percent decline doesn’t look so bad, especially considering that the broader Hang Seng Index, the main indicator for Hong Kong stocks, also fell 1.5 percent on Thursday, taking a breather after a strong rally to start the year. I haven’t had a close look at Sunshine Oilsands’ financials, but as a company in the relatively risky oil sands business it certainly doesn’t look like a guaranteed winner over the longer term, especially if oil prices come down below the $80 mark in the next year. That reality, along with continued investor caution about China stocks in general, led Sunshine shares to price near the lower end of their indicated range, again a sign that doesn’t look too encouraging. But one has to look at the bigger picture here, namely the fact that the IPO actually made it to market at all and managed debut roughly in line with the broader market. In the current climate, that looks like a positive start to me, and the latest sign that the confidence crisis has bottomed out and positive investor sentiment is starting to return. (previous post) A bigger test could come in the weeks ahead if and when 3 Chinese firms, Internet companies Shanda Cloudary and Vipshop, and car rental specialist China Auto make their debuts after filing in recent weeks for New York IPOs. The 2 Internet offerings will be especially challenging, as both companies are losing money. But if even 2 of the 3 can make it to market and post flat to modestly-down trading debuts, it could be time to officially call a bottom to last year’s confidence crisis.

Bottom line: The first successful overseas IPO of a major China-backed firm this year, despite a weak pricing and debut, is the latest sign that investor confidence is returning to such stocks.

Confidence Crisis Easing For US China Stocks 中国概念股信任危机缓和

By newsdoug on February 28, 2012

While it’s never too smart to call a major market turnaround, growing signs are emerging that last year’s confidence crisis for US-listed China stocks may have finally turned a corner, with a strong rebound on the horizon if the broader market remains healthy. The first 2 months of the year have seen several positive developments for Chinese stocks in New York, following a disastrous 2011 that most would rather forget as their shares were pummeled by a series of accounting scandals that undermined the entire sector. Sensing that the worst of the crisis is over, 3 Chinese companies have filed for new US listings in the last few weeks, betting that investors will once again be interested in the China growth story. At the same time, short sellers and lawyers who seized on the crisis to make quick bucks have found far less success in some of their most recent attacks, indicating investors are once again giving Chinese companies the benefit of the doubt now that many more questionable firms have been de-listed. The nascent return of confidence is most evident in the share prices for many US-listed Chinese firms, some of which fell by 50 percent or more last year at the height of the crisis that began with attacks on 2 names, financial services company Longtop Financial and timber firm Sino-Forest. Both companies saw their shares tumble after short sellers questioned different aspects of their accounting, and Longtop was ultimately de-listed. Since bottoming out in mid December, shares of many industry stalwarts that were dragged down in the crisis have posted a strong recovery, with Internet search leader Baidu (Nasdaq: BIDU) and top web portal Sina (Nasdaq: SINA) both up about 20 percent since mid-December. Even smaller names have joined in the rally, with social networking site Renren (NYSE: RENN) and online video site Youku (NYSE: YOKU) both up by 30 or more. Equally significant has been the failure of a number of short seller attacks, which netted big bucks for companies last year. Muddy Waters, whose name became synonymous with the attacks after its successful assault on Sino-Forest last year, has found much less success with a more recent attack on Focus Media (Nasdaq: FMCN). Focus shares initially fell sharply after Muddy Waters questioned some of its data late last year, but have rallied sharply since then and are now close to their pre-attack levels. A similar attack late last year on security software firm Qihoo 360 (NYSE: QIHU) has also failed to convince investors, with the company’s stock now trading near pre-attack levels after initially falling more than 10 percent. At the same time, a series of recent investor lawsuits designed to seize on a drop in the share price of IT outsourcing firm Camelot Information Systems (NYSE: CIS) has also failed to dent the company’s stock price, again indicating investors may feel the worst is past and these Chinese companies are now more trustworthy. As the confidence creeps back, a small trickle of Chinese companies have decided to test their luck with the New York IPO market. Car rental firm China Auto was first out of the gate when it filed for an offering in January, ending several months with no major new Chinese listings. It was followed this month by e-commerce firm Vipshop and Shanda Cloudary, which initially filed for an IPO last year but had to pull the offering due to poor investor sentiment at the height of the crisis. The real test of whether the worst is really past will lie in the weeks ahead, as these 3 offerings go to market and meet with either investor interest or more skepticism. I personally think China Auto could do well, though the 2 Internet offerings could meet with more tepid interest as both are still losing money. Still, if these 3 can post even modest success, which looks like a strong possibility, it could signal the crisis has truly turned the corner, meaning a solid rally may be in store for these stocks for the rest of the year.

Bottom line: Growing signs are emerging that the confidence crisis for US-listed China stocks may be over, with 3 upcoming IPOs providing a strong test of a turning point for the battered sector.

Vipshop Vies For First Internet Listing of 2012 唯品会欲在赴美上市电商公司中力拔头筹

By newsdoug on February 20, 2012

Vipshop files for first Internet IPO of 2012 An online discount retailer named Vipshop has taken an early lead in the race to become the first Chinese Internet company to list in the US this year, while the more established Sohu (Nasdaq: SOHU) has set up a new headquarters for its popular video service, laying the groundwork for its own US IPO for the unit. Meantime in other news for US-listed tech firms, IT outsourcing company Camelot Information Systems (NYSE: CIS) has been hit by a second class action lawsuit over a big drop in its share price, in what looks like another major headache for the company. Let’s look at Vipshop first, a relatively small company that is taking the bold move of being the first Chinese web firm to file for a US IPO this year, with plans to raise up to $125 million. (English article) The company looks similar to many other Chinese e-commerce firms in that it is losing money, posting a loss of $107 million last year amid stiff competition in the space. Considering its money-losing status and lingering broader doubts about the accounting practices of Chinese companies in general, this offering is likely to attract very limited interest and in all likelihood will fall in its trading debut. Investors interested in China IPOs would be better served to look at another company, car rental firm China Auto, which became the first Chinese firm this year to file for a US listing last month with plans to raise up to $300 million. (previous post) Meantime, Sohu has announced it will spend $20 million to set up a headquarters for its popular online video site in Tianjin. (Chinese article) The location of the office in Tianjin, clearly separate from Sohu’s own Beijing headquarters, indicates that Sohu is trying to develop this unit as its own entity and I would expect to see the company file for a potential US IPO for the unit as soon as the second half of this year, putting it alongside rivals Youku (NYSE: YOKU) and Tudou (Nasdaq: TUDO) as a publicly listed firm. Lastly, there’s Camelot, which after being hit by one class action shareholder lawsuit earlier this month, has now been hit by yet another one from another law firm specializing in such suits, after a sharp drop in the company’s stock in 2010 and 2011. (lawsuit announcement) Somewhat surprisingly, the stock hasn’t reacted very much to the lawsuits, and actually rose 2.5 percent on Friday. Perhaps that’s because its shares are already down sharply from the $25 level of about a year ago to their latest close in the $2.50 range. Maybe there’s a good buying opportunity here, though of course that’s assuming that Camelot can survive these 2 lawsuits.

Bottom line: Vipshop will attract weak investor interest as China’s first US Internet IPO of 2012, while Sohu’s latest moves indicate an IPO for its video business potentially by year end.

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