Qunar Cayman Islands Ltd. and 58.Com Inc. (WUBA) jumped after selling shares above their price targets, a signal that appetite for Chinese companies remains unshaken by Muddy Waters LLC’s fraud allegations against NQ Mobile Inc.
Qunar, a travel-booking service controlled by Baidu Inc. (BIDU), rose 89 percent Nov. 1 after selling American depositary receipts at $15 each, above an initial target of as much as $11.50. 58.Com, a Chinese online marketplace similar to Craigslist, has soared 47 percent from its initial public offering price of $17 on Oct. 31. The Bloomberg China-US Index of the most traded Chinese stocks in the U.S. advanced 1 percent last week as the gauge capped a four-month rally.
Five Chinese firms have completed U.S. IPOs this year, rallying an average 43 percent, according to data compiled by Bloomberg. Both Qunar and 58.com raised their target price ranges before completing the offering, underscoring investor confidence even as NQ Mobile (NQ) has lost 44 percent following Muddy Waters’ Oct. 24 report saying it inflated sales. NQ co-Chief Executive Officer Omar Khan said the company’s revenue is real.
“NQ has no impact on other China names -- it’s an isolated case,” Erik Lam, director of Asian equity sales at Auerbach Grayson & Co. in New York, said by e-mail Nov. 1. “Qunar is the leading search-based commerce platform for the travel industry in China. Revenue growth has been very strong. Qunar’s upward revision to its price range bodes quite well for a pipeline of new IPOs by Chinese tech companies.”
The iShares China Large-Cap ETF (FXI), the largest Chinese exchange-traded fund in the U.S., added 3.8 percent last week to $37.83, the most in eight weeks. The Standard & Poor’s 500 Index completed a four-week rally.
Qunar’s ADRs jumped to $28.40 after its $167 million IPO. The 89 percent first-day surge was the best start among the five Chinese IPOs this year. The offering had an initial target of $9.50-$11.50, which was later boosted to as much as $14, according to filings of the Beijing-based company.
Baidu, operator of China’s largest search engine, purchased in 2011 a majority stake in Qunar, whose reported sales jumped 75 percent from a year earlier to 358.8 million yuan ($58.5 million) for the first six months this year while net loss narrowed from a year earlier to $2.8 million.
The number of Qunar’s active web users grew to 31.4 million for the 12 months through June, from 12.6 million in 2010, the company said in its filing.
“Short term, we are going to focus on market share as well as cash flow balance,” Cc Zhuang, CEO and co-founder of Qunar, said in a phone interview in New York Nov. 1. “We are trying to build something that can generate long-term profitability.”
58.Com, which raised $187 million in its IPO, priced its sale of 11 million ADRs at $17 apiece, higher than its initial target range of $13 to $15. Its ADRs surged to $25 last week.
The company posted net income of $285,000 for the first half this year, compared with a net loss of $19.3 million a year earlier, its prospectus showed. The company’s revenue, mainly from merchant membership charges and sales from customers’ online marketing, jumped 51 percent to $58.8 million in the six months through June.
The IPOs were “mainly driven by the companies’ recent income statement results, which showed significant revenue growth with high gross margins,” Francis Gaskins, president of Marina Del Rey, California-based IPOdesktop.com, which monitors initial public offerings, said by e-mail Nov. 1.
NQ Mobile, based in Beijing, sank to $12.78 last week. Carson Block, the Muddy Waters founder whose short call prompted a three-day plunge in NQ Mobile following his report, said in a Bloomberg Television interview Nov. 1 the stock will be delisted amid allegations it fabricated revenue and lied about its cash.
Khan said a delisting from the New York Stock Exchange is “absolutely absurd” in a separate interview with Bloomberg TV on the same day. Rich Adamonis, a spokesman for the New York Stock Exchange, said the bourse had no comment.
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