Web firms' IPOs earn big bucks

08:39, December 09, 2010      

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E-Commerce China Dangdang Inc (Dangdang) and Youku.com Inc (Youku) raised as much as 23 percent more than originally sought in their US initial public offerings, the latest sign of surging demand for shares of Chinese Internet companies.

Dangdang, the country's biggest Internet book retailer, sold 17 million American depositary receipts (ADRs) at $16 each on Tuesday after originally offering them for $11 to $13 apiece, according to a filing with the Securities and Exchange Commission and data compiled by Bloomberg. Youku, China's largest online video company, raised $203 million after seeking $169 million, the data show.

The offerings were the first of five Chinese IPOs scheduled in the United States this week. The sales will bring the number of Chinese IPOs in New York to 39 this year, surpassing the 37 in 2007, according to data compiled by Bloomberg.

"The combination of a high-growth sector in a high-growth geography with increasing affluence is the perfect storm in terms of potentially explosive profit growth," said Michael Yoshikami, who oversees $1 billion at YCMNet Advisors. Chinese Internet IPOs "are going to continue to be the ones that investors chase", he said.

Credit Suisse Group in Zurich and Morgan Stanley of New York led the offering for Dangdang, while New York-based Goldman Sachs Group managed Youku's sale. The two Beijing-based companies started trading on the New York Stock Exchange on Wednesday.

The four previous Chinese Internet companies that completed US IPOs this year surged an average of 57 percent in their first day of trading, Bloomberg data show.

ChinaCache International Holdings Ltd, a Beijing-based provider of content for business websites, posted the biggest first-day rally on US exchanges in three years, jumping 95 percent on Oct 1.

Dangdang's original midpoint valued the company at 48 times annual earnings, based on third-quarter results. That's 64 percent higher than the median of 29.2 estimated profit for 11 US-traded Internet retailers, data compiled by Bloomberg show.

Amazon.com Inc of Seattle, the biggest online merchant, trades at 39 times profit, the data show.

Dangdang, which operates the dangdang.com website, increased sales by 56 percent in the first nine months of 2010 year-on-year. The company plans to use proceeds to broaden its product categories and expand its order fulfillment capabilities, its prospectus said.

Youku sold 15.85 million ADRs for $12.80 each after offering 15.4 million for $9 to $11 apiece, an SEC filing and Bloomberg data showed.

The midpoint valued Youku.com at 15 times projected annual sales, compared with the median of 3 times estimated 2011 revenue for 12 US-traded Internet-content providers, according to data compiled by IPOdesktop.com and Bloomberg.

China's online-video market more than doubled to 621 million yuan ($93 million) last quarter, according to the Beijing-based Analysys International.

China had an estimated 420 million Internet users at the end of June, according to data from the China Internet Network Information Center.

Source:China Daily


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