The online business of People’s Daily, the Chinese Communist Party’s official newspaper, raised 1.4 billion yuan ($222 million) in a Shanghai initial public offering, nearly three times the amount it initially sought.
People.cn Co. sold 69.1 million shares at 20 yuan each, the bottom of its latest price range, according to a Shanghai Stock Exchange filing yesterday. The sale values the company at 5.5 billion yuan, or 46 times earnings, 4.5 percent higher than the industry average ratio of 44, according to the filing.
The Chinese website operator will have 276 million shares outstanding after the share sale and an initial market capitalization of $872 million. The New York Times Co. (NYT) is currently valued at about $954 million.
People.cn’s parent, the newspaper People’s Daily, was founded in 1948, and for decades its editorials were considered authoritative statements of government policy. Its page one still carries a calligraphic title copied from a version handwritten by Mao Zedong, founder of the People’s Republic of China. People.cn’s advantages include its exclusive government news content and stable advertising revenue from companies including government-related entities, it said in an IPO prospectus in January.
Renmin Sousuo, meaning “people’s search” in Chinese, is another unit of the newspaper and 19 percent owned by People.cn. It reported no revenue in 2010 and net income of 30 million yuan, the prospectus shows, without providing further details.
Use of Proceeds
People.cn is raising more money than its confirmed investment projects of as much as 1 billion yuan, according to the filing this week. The excess amount, if not managed properly, may affect profitability and cause the issuer’s share price to drop in the future, the statement says.
People.cn plans to use part of the proceeds to fund a 527 million yuan upgrade of its networks and content, more than a decade after rivals such as Sina Corp. (SINA) and Sohu.com Inc. (SOHU) went public in the U.S. Sina is valued at 32.1 times its 2011 earnings and Sohu has a price-earnings ratio of 11.4 for its U.S.-listed shares.
In a detailed list of planned purchases, People.cn includes a 400,000 yuan budget for 40 mobile devices including iPads and iPhones, according to the prospectus, or 10,000 yuan per device. The most expensive iPad model being offered on Apple Inc.’s Chinese website costs 5,488 yuan, while the most advanced iPhone was quoted for 6,788 yuan.
State-owned carriers China Mobile Communications Corp. (941), China United Network Communications Group, and China Telecommunications Corp. are among the shareholders of People.cn, according to the prospectus. People’s Daily owns about 80 percent of the unit’s stock.
People.com.cn, the main website operated by People.cn, was the 50th most popular website in China on Aug. 22, according to the prospectus, which cited data from Chinarank.org.cn. The website of New York-listed Sina was ranked fourth on that day, while Sohu’s placed seventh, according to the document.
Revenue rose 75 percent to 331.7 million yuan in 2010 from 190 million yuan a year earlier, according to the prospectus. Profit more than tripled to 81.6 million yuan in 2010.
People.cn has been granted a corporate tax waiver for the four years through 2013, according to the prospectus. It saved 20 million yuan in 2010 because of that policy. The website operator provides information services for the government, and China’s Ministry of Finance paid People.cn 74 million yuan in 2010 for such services, accounting for 22 percent of its total revenue that year.
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