SouFun Holdings Ltd. (SFUN), the operator of China’s biggest property website, posted the second-largest first-day gain for a U.S. initial public offering this year after raising $125 million selling shares at the top of its price range.
The company that controls almost half of China’s online real-estate advertising market surged 73 percent, or $31, to $73.50 in New York Stock Exchange trading after selling 2.93 million American depositary receipts at $42.50. At the midpoint price, SouFun was valued at 14.3 times earnings, 14 percent less than the average of six Internet portals and property information providers, data compiled by Independent International Investment Research Plc and Bloomberg show.
The offering came after the number of Internet users in China, the world’s fastest growing major economy, surpassed the entire U.S. population. The IPO was the first of at least 11 scheduled in the U.S. this month after the Standard & Poor’s 500 Index (SPX) rebounded 10 percent from its 2010 low in July.
“People are flocking to IPO issues that they think are interesting and colorful and price at the top end,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. “It’s a very positive beginning for a new IPO cycle.” Schuster bought shares of SouFun, whose Chinese name means “housing search.”
Telstra, Private Equity
Telstra Corp. (TLS), Australia’s largest telephone company and the owner of 50.5 percent of SouFun’s shares, had planned to sell its entire stake in the company to IPO investors and other buyers, according to the SEC filing. Melbourne-based Telstra paid $254 million for 40.73 million shares in 2006, and the IPO’s price valued Telstra’s current stake of 40.75 million ordinary shares, equivalent to 10.19 million ADRs, at about $433 million, data compiled by Bloomberg show.
Private-equity firms General Atlantic LLC of Greenwich, Connecticut, and London-based Apax Partners each planned to buy 15.3 million shares from Telstra, giving them both 19 percent stakes in SouFun following the offering, the filing showed.
SouFun’s valuation of 14.3 times next year’s earnings compared with 22.8 times for Shenzhen, China-based Tencent Holdings Ltd. (700), China’s biggest Internet company by market value, and LoopNet Inc., the San Francisco-based operator of a real estate marketing website, according to Independent Investment Research in London.
China had an estimated 420 million Internet users at the end of June, an increase of 36 million from six months earlier, according to data from the government-sponsored China Internet Network Information Center. The U.S. population is about 310 million, according to the Census Bureau’s website, while about 231 million Americans have access to the Internet, according to the Washington-based World Bank.
The value of August property sales in China rose about 15 percent from July, and prices jumped 9.3 percent from a year earlier, the government’s statistics bureau said on Sept. 10. Chinese officials have imposed measures such as banning loans and raising mortgage rates and down-payment requirements for purchases of extra homes to curb speculation. They may extend crackdowns, New York-based Citigroup Inc. said this month.
SouFun’s IPO was the first in the U.S. excluding closed-end funds since Houston-based Whitestone REIT (WSR) raised $26.4 million on Aug. 25. At least 43 companies withdrew or postponed offerings this year amid growing signs that the American economy’s recovery from the longest recession since World War II was deteriorating.
At least three other Chinese companies are scheduled to price U.S. IPOs this month, data compiled by Bloomberg show.
China Ming Yang Wind Power Group Ltd. (MY), the Zhongshan, China-based maker of wind turbines; Country Style Cooking Restaurant Chain Co. (CCSC), the Chongqing, China-based operator of about 100 fast-food locations in China; and ChinaCache International Holdings Ltd. (CCIH), the Beijing-based provider of Internet content to businesses and government agencies, are seeking to raise a combined $536 million, Bloomberg data show.
Chinese companies and Gurgaon, India-based MakeMyTrip account for four of the five best-performing IPOs in the U.S. this year, data compiled by Bloomberg show.
“China’s the largest Internet market, and it’s growing in affluence, which means you’re going to have more people accessing the Internet,” said Michael Yoshikami, who oversees about $1 billion at YCMNet Advisors in Walnut Creek, California. “Anything that has Internet, China and IPO in it will be strongly appealing to investors.”
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