Overseas IPOs Grew Popular Among VC/PE-backed Chinese High-flying Firms
Overseas IPOs Grew Popular Among VC/PE-backed Chinese High-flying Firms
Since this September, China’s overseas IPOs have taken place one after another in a quick succession. Even during the National Day holiday in China, which lasted from Oct.1- 7, there were several Chinese firms that landed on overseas capital markets, including Mingyang Electric’s IPO on the NYSE and Lanxun Precision’s public listing on the NASDAQ. Among these overseas IPO debutants, there were a few big-names, such as SouFun, MicroPort, Dr. Frog, CSC and Besunyen, and most of them were backed by VC/PE institutions at some points in their developmental process, suggesting a rising trend of capital exits via overseas IPO sought for by institutional investors .
According to the latest statistics from CVSource - ChinaVenture’s online database system, during the short period of Oct. 1—8, as many as ten Chinese firms managed to get listed on overseas capital markets. With added to these enterprises completing their road-shows abroad, there were more than 20 Chinese firms landing on overseas capital markets, including 11 VC/PE-backed Chinese firms (as shown in Table1).
List of China’s VC/PE-backed Overseas IPOs During Oct. 2010 Stock Date
Company
Sector
Institutions Exchange
Mingyang
Alternative
2010-10-1
DT Capital /Shenzhen Capital NYSE
Electric
Energy
/Merrill Lynch /Tripod Capital Qiming Venture Partners/ Ignition/Investor AB/SIG Asia
2010-10-1
ChinaCache
IT
NASDAQ
Investments/JAFCO Asia / Intel Capital /Tiger Global Management
Alternative 2010-10-7
Trony Solar
HKEx
ICBCI
Energy Bain Capital /Deutsche Bank 2010-10-7
SUNAC
Real Estate
HKEx
A.G./CDH Investments/New Horizon
Alternative 2010-10-7
DAQO Group
GGV Capital /Siguler Guff NYSE
Energy
/NewMargin Ventures
Alternative 2010-10-8
Goldwind
HKEx
China-Belgium Fund
Energy 2010-10-8
Global IELTS
Education
Winsway Coking
Traditional
Coal
Energy
2010-10-19
ShangPharma
TBD
Mecoxlane
2010-10-11
NASDAQ
SAIF Partners
HKEx
Hopu Fund
Healthcare
NYSE
TPG
E-commerce
NASDAQ
Sequoia Capital China/Zero2IPO Capital Tiger Global Management TBD
Xueersi
Education
NYSE /KTB
CVSource, Oct. 2010
Table 1: China’s VC/PE-backed Overseas IPOs During Oct. 2010
www.ChinaVenture.com.cn
According to the latest analysis, since the third quarter, China’s overseas IPOs have been on a drastic rise, as evidenced in as many as ten overseas IPOs by the Chinese enterprises within just the first week in the fourth quarter of this year. It is highly expected the last quarter of this year will be likely to see a boom in China’s overseas IPOs. In terms of the deal size, the average amount of fundraisings for China’s overseas IPOs in the third quarter stood at USD 427 million, up by 374.9% over the previous quarter, suggesting a rising trend in corporate valuations of Chinese enterprises on overseas capital markets (as shown in Figure 1).
Figure 1: China’s overseas IPOs During Q1/2009-Q4/2010
Most of China’s overseas IPO debutants in this October have been backed by some investment institutions, indicative of a rising trend of investment institutions seeking for exits via overseas IPO. The average book ROI for IPOs in the HKEx since the third quarter dropped slightly compared with the first half of this year, while the figures for IPOs in both the NASDAQ and the NYSE registered a dramatic increase (as shown in Figure 2). One of the telling stories was SouFun. The company listed in the NYSE on September 18, 2010, bringing about an eye-popping book ROI of as high as 107.2 times to its backer, IDG capital, 11 years later, the highest ROI for overseas exits seen in the recent years.
Figure2: Average Book ROIs for China’s Overseas IPOs During 2010 by Exchange
The boom in overseas exits were attributed to various factors: sustained recoveries in major economies, coupled with continued pickups in international stock markets for the past few months, contributed to the increasing activity in public offerings. On the other hand, China’s overseas IPO debutants largely came from a few emerging or high growth sectors, such as TMT, alternative energy, consumer goods and education, which will be sure to benefit from the vast and ever-expanding domestic markets, as a result, these companies were overvalued on international capital markets. In addition to high valuations, some USD fund managers were hard pressed to exit from their backed entities as life cycles of their funds are expiring, so, they are eager to push for quick exits by encouraging their backed entities to go public abroad.
In ChinaVenture’s opinion, not only will a rising activity in China’s overseas IPOs contribute to the performance of foreign institutions, especially USD-denominated funds, but also will give RMB-denominated local funds much more say in their fundraisings. Meantime, the latest development on international IPO market will also prompt investment institutions to adopt multi-currency investment strategies, and increase their allocations in their investment portfolios for local enterprises.
About CVSource
Created by ChinaVenture Group, CVSource is an online database system providing professional information and data solutions, including analysis of equity investment trends, records and analysis of investments and M&A activities, industry research, company analysis, analysis of funds and fund managers, breakdown of investment terms and conditions and studies on regulations on fundraisings and investments. CVSource is dedicated to provide information services to all players active in the Chinese VC & PE market--VC/PE investment institutions, limited partners, strategic investors, investment banks, law firms, accounting firms, research institutes, consulting firms and domestic companies seeking investors.