Xunlei launches IPO on NASDAQ

China's leading video and music file-sharing company Xunlei Ltd finally floated on the NASDAQ Tuesday, expecting to raise over $100 million, after it had previously withdrawn its plans to go public in the market.

The Shenzhen-based company would sell 7.3 million American Depositary Shares (ADSs), the same as the amount it had planned but at a higher offering price of $12 per ADS. And underwriters have been given a 30-day option to buy up to an additional 1.09 million ADSs. The expected IPO price ranged from $9 to $11 each, according to a prospectus filed to the US Securities Exchange Commission (SEC) Friday.

Xunlei's share price stood at $14.21 a share, or 18 percent higher than the offering price, as trading began on Tuesday.

The company, founded in 2003, had long been trying to get listed in the US.

It filed its IPO to the SEC in 2011, but failed, partly because of alleged piracy.

In order to ease US regulators concerns, the company stepped up its efforts on copyright protection. The company's most recent move was to ink a partnership on June 4 with the Motion Picture Association of America to promote legitimate access to its online videos via a content-recognition technology system developed by Xunlei.

Analysts said that even though copyright will no longer be a major concern for US investors, they are unlikely to show strong interest in Xunlei, citing its current risky business model.

"The company largely relies on subscription services or paid online content, which are faced with strong domestic competitors such as Youku Tudou and iQiyi as well as risks from China's strict censorship," said Zhang Yi, CEO of Shenzhen-based market research company iiMedia Research.

He told the Global Times Tuesday that the final offering price is reasonable in terms of Xunlei's current performance and portfolio, even though it is lower in comparison with other US-listed Chinese Internet companies.

According to the prospectus, the subscription fees contributed 60.3 percent to the total revenues of $41.2 million during the three months ending March 31, 2014.

Over the same period of 2013, the company recorded $41.3 million in overall revenue.

The company is also highlighting its cloud acceleration products, free services designed to help subscribers accelerate their access to online videos, which it expects to attract users. But some foreign investors doubt its prospects in the future.

Xunlei expects to take advantage of China's generally poor Internet speeds through cloud acceleration products, which could be at risk when the speed is increased in the market, Don Dion, owner of DRD Investments, wrote in a research note posted on New York-based investment research platform Seeking Alpha on Tuesday.

It seems that Xunlei has also sensed the need for transformation.

Xu Hao, an industry analyst with Beijing-based market consultancy iResearch, told the Global Times Tuesday that Xunlei is trying to shift its main focus from its online video platform and related services to other fields such as cloud computing and mobile devices.

In March, the company made a foray into the set-top TV boxes market, offering online video content to users.

"We are increasingly expanding our services to living room-based Internet devices and mobile devices, as part of our cloud-based home and mobile strategy," the company said in the prospectus.

In January 2014, Xiaomi, a Beijing-based smartphone maker, poured investment of over $300 million into Xunlei, which was widely considered as a move to support Xunlei's IPO.

Whether Xunlei's team-up with Xiaomi can be appealing to foreign investors will depend on whether Xunlei could boost its mobile gaming services with the advantages of Xiaomi's devices and customers, said Zhang.