Chinese firms regaining interest in US IPOs

Chinese firms have a renewed interest in IPOs in the US capital market, as indicated by the latest listing applications of e-commerce retailers including Alibaba, Jumei and online job recruiting platform zhaopin.com.

There could be more Chinese firms getting IPOs in the US this year as American investors regain confidence in US-listed Chinese firms after the credibility crisis in 2011, Terence Ho, IPO leader of Ernst & Young China, told the Global Times on Wednesday.

"It is a good time for the Chinese companies to seek a listing this year, as the stock valuation on Chinese firms is getting back to normal level," Ho said.

US investors have shown some confidence in Chinese firms since the second half of 2013, two years after a credibility crisis gripped US-listed Chinese companies hit by a series of financial scandals and attacks by short-sellers like Citron Research and Muddy Waters.

The crisis weakened US investor sentiment and led to discounted valuation on Chinese stocks.

Now the valuation of US-listed Chinese stocks is similar to US counterparts in the same sector, he said.

Four Chinese firms already floated their IPOs in the US so far this year, including China's tweeter-like microblogging service provider Sina Weibo, and online property brokerage firm Leju Holdings.

Sina Weibo's share price hiked 19 percent from its IPO price on its first trading day in NASDAQ on April 18, while Leju's shares jumped 18.6 percent on the same day of debut on New York Stock Exchange.

Eight Chinese firms got listed in the US in 2013, three Chinese firms launched IPOs in the country in 2012 and there was only one listing in 2011 when the financial scandals and attacks of short-sellers sent Chinese firms' stock prices down in the US market.

Alibaba Group Holding, China's e-commerce behemoth, is among the latest Chinese companies showing enthusiasm toward the US capital market.

The online retailer filed a prospectus with the US Securities and Exchange Commission (SEC) on Tuesday (US time), which is expected to raise more than $15 billion, in what could be the largest technology debut in history.

Jumei International Holding also filed a supplementary document with the SEC on Tuesday disclosing its first-quarter performance.

The online beauty products retailer had net income of $16.6 million in the first three months of this year, two-thirds of the total net income of 2013.

The firm plans to raise up to $234.89 million from the listing on the New York Stock Exchange (NYSE).

Zhaopin.com, a major job recruitment site in China, has filed for an IPO on the NYSE on Monday with plans to raise up to $100 million. With 74 million registered users as of last year, it posted revenue of $147 million mainly from its online recruitment business by the end of 2013.

Some downside risk remains on the stock performance of US-listed Chinese companies such as pressure of China's tightening regulation over Internet finance service providers including Alibaba, according to Ho.

Many high growth Chinese firms, especially tech firms, choosing to get listed in the US shows their shortage of capital amid pressure of a cooling economy, Ren Haoning, a senior analyst at CIC Industry Research Center, told the Global Times on Wednesday.

Demanding requirements about financial results have driven many smaller yet high-growth Chinese firms to seek a listing in the US rather than in China's A-share market, Ren said, "because they do not meet these requirements."

An overall sluggish stock performance on the Chinese A-share market makes the actively trading and currently bullish US stock market more attractive for these smaller firms, he said.

The A-share stock performance is often dragged down by heavy-weighed State-owned enterprises including listed banks, property developers and miners, he noted.

"There could be over 20 Chinese firms going for IPOs in the US this year, hitting record highs in both number of listings and raised fund," Ren estimated, citing talks with investment bankers.

Even though the US stock benchmarks S&P 500 and Dow Jones Industrial Average reached historic highs last year, and continue to head upward so far this year, it is more volatile in response to non-economic factors, such as tension between the US and Russia over the Ukraine conflict, which implies a downside risk for Chinese firms' stock debut in the US, Ren said.