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China’s Sky-mobi, Bona Post Biggest 1st-Day U.S. Slumps of 2010

The Youku.com Website
Beijing-based Internet company Youku.com Inc. surged at least 87 percent in its first day of trading. Photographer: Nelson Ching/Bloomberg

By Lee Spears and Cecile Vannucci

Dec. 11 (Bloomberg) -- China’s Sky-mobi Ltd. and Bona Film Group Ltd. posted the biggest first-day declines since 2007 in U.S. trading following their initial public offerings this week, renewing a slump in IPOs by mainland companies.

Sky-mobi, the operator of China’s largest mobile application store by sales, slid 25 percent in Nasdaq Stock Market trading yesterday. Bona Film, the country’s biggest privately-owned film distributor, fell 22 percent a day earlier. Those were the steepest first-day retreats on New York exchanges since Beijing-based Agria Corp. sank 27 percent on Nov. 7, 2007, data compiled by Bloomberg show.

While Beijing-based online companies Youku.com Inc. and E-Commerce China Dangdang Inc. surged after their IPOs this week, six other mainland companies that completed sales from Nov. 17 through yesterday have retreated after the government raised interest rates and said that it may impose price controls to combat inflation, data compiled by Bloomberg show.

“The chance that they can engineer a soft landing seems kind of sketchy,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. “You can pretty much sell virtually any U.S. investor on the China growth story. It’s just a matter of what you’re willing to pay for it.”

2007 Record

Sky-mobi, located in the city of Hangzhou in Zhejiang province, sold 7.25 million American depositary receipts for $8 apiece two days ago after offering them for as much as $10 each, according to its filing with the Securities and Exchange Commission and a company statement. The offering pushed the number of initial sales by mainland companies past the record of 37 in 2007, data compiled by Bloomberg show.

Bona Film of Beijing sold 11.7 million ADRs for $8.50 each on Dec. 8 after offering them for $7 to $9.

While four of the ten best performing U.S. IPOs of 2010 have come from China, Youku.com and China Dangdang were the only ones to post gains of more than 5 percent since the government said on Nov. 17 that it may impose price controls. China had already raised interest rates in October to combat the fastest inflation in two years.

Youku.com, the nation’s largest online video company, jumped 161 percent on Dec. 8, the steepest gain for a U.S. IPO since Beijing-based Baidu Inc. five years ago. China Dangdang, the country’s biggest Internet book retailer, surged 87 percent the same day.

‘Can’t Necessarily Translate’

China had an estimated 420 million Internet users at the end of June, according to data from the government-sponsored China Internet Network Information Center. The U.S. population in 2010 ranged from 305.7 million to 312.7 million, Census Bureau data show. China’s economy will grow 9.6 percent next year, versus 2.3 percent for the U.S., according to estimates from the Washington-based International Monetary Fund.

“When you put the two themes of China and Internet together, it creates good conditions to bring a company public,” said Walter Todd, co-chief investment officer at Greenwood, South Carolina-based Greenwood Capital, which oversees about $900 million. “You can’t necessarily translate that to other industries.”

One Chinese company, ISoftStone Holdings Ltd., is scheduled to list its shares in New York next week, according to data compiled by Bloomberg. The Beijing-based information technology services provider will offer 10.8 million ADRs at $11 to $13 each Dec. 13, according to an SEC filing.

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