Muddy Waters NQ Short Call Fails to Freeze Chinese IPOsMatthew Kanterman
Chinese companies are selling shares in New York at the fastest pace in two years less than a month after short seller Carson Block’s call spurred a 62 percent plunge in Beijing-based NQ Mobile Inc.
Three Chinese companies have debuted on U.S. bourses this month, raising $345.4 million, the most since May 2011, when six companies listed $1.3 billion of shares. 500.com Ltd., an online sports lottery service, raised $75.2 million in an initial public offering. Sungy Mobile Ltd., which makes applications for Google Inc.’s Android software, sold 7 million shares at $11.22. 58.Com Inc., an online marketplace similar to Craigslist, and travel agency Qunar Cayman Islands Ltd. have sold shares above their price targets since Oct. 30.
Chinese companies refrained from tapping the U.S. markets in the second half of 2011 after short sellers such as Block’s Muddy Waters Research LLC accused companies including Sino-Forest Corp. of misstating assets. While Muddy Waters’s Oct. 24 sell call on NQ Mobile sank the stock, it didn’t slow IPOs backed by venture-capital firms from Menlo Park, California-based Sequoia Capital to Tokyo-based Jafco Co.
“The average IPO out of China is definitely much more scrutinized than it used to be and that’s helping to improve investor confidence in those deals,” Josef Schuster, the founder of IPOX Schuster LLC in Chicago, an IPO research firm, said by phone Nov. 21. “Some of the deals, they are backed by U.S. venture capital and are brought out by high-profile U.S. underwriters which cannot afford to bring a bad company to the market.”
Since the dot-com bubble in 2000, 32 Chinese Internet companies have debuted in the U.S., according to data compiled by Bloomberg. Sina Corp., the owner of China’s Twitter-like Weibo service, has more than quadrupled since it went public in April 2000. Baidu Inc., owner of China’s most-popular Internet search engine, has rallied 5,767 percent since its debut in 2005.
“We wanted to be together with the other Internet plays from China,” Zhengming Pan, the chief financial officer of 500.com, said in a phone interview from the New York Stock Exchange on Nov. 22. “We will get better research coverage and we will have a better investor base.”
In the face of pressure from short sellers like Muddy Waters, Pan said that demand was strong for the company’s IPO. The deal was priced at $13, the top end of a range.
NQ Mobile, a Chinese mobile-services provider, was accused of inflating revenue by Muddy Waters Research last month. The company has denied the allegations and transferred $103 million in cash to an account at Standard Chartered Bank to demonstrate its reserves.
Sungy Mobile saw an opportunity to grow its brand in its largest market overseas with a New York share sale, Chief Financial Officer Jin Li said in a phone interview from the Nasdaq Stock Exchange. The Guangzhou, China-based company sold shares at $11.22, near the top of its expected price range.
“In the last few days, after we got the feedback from the investors, the results have been very positive, and we got very good orders from big-name investors,” Li said. “If you look at the downloads of our apps, the majority of that happens on Google Play. We happened to be ranked No. 3 in terms of total downloads as a publisher right after Facebook and Google.”
500.com surged 54 percent on its first day of trading to $20.01. Sungy Mobile climbed to $13.35, 19 percent above its issue price.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York rose 1.3 percent to 107.32 last week. The Shanghai Composite Index retreated 0.3 percent to 2,190.48 at 10:14 a.m. local time after gaining 2.8 percent last week. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell 0.1 percent.