The IPO Buzz: IPOs Fortune Cookies

Three of this week’s four Chinese deals are reportedly on somebody’s “Most Wanted” list. They are:
  • Concord Medical Services Holdings (NYSE: CCM – proposed), based in Beijing, believes it operates the largest network of radiotherapy and diagnostic imaging centers in China. For the 12 months ending Sept. 30, 2009, Concord reported net income of $18.7 million on revenues of $40.3 million. Bankers plan to price 12 million American Depositary Shares (ADS) at $9.50 to $11.50 each on Thursday evening to trade Friday morning. (Note: The deal’s price range has already been increased from its original range of $9 to $11 per share.)
  • Linkage Technologies International Holdings (NASDAQ: BOSS – proposed), based in Nanjing, is a provider of software solutions and IT services for the telecommunications industry in China. For the 12 months ending June 30, 2009, Linkage reported net income of $26.5 million on revenues of $121.9 million. Bankers plan to price 10.2 million ADS at $13 to $15 each on Wednesday evening to trade Thursday morning.
  • Trony Solar Holdings (NASDAQ: TROY – proposed), based in Shenzhen, believes it is one of the world’s leading thin film solar product and solution providers. For the 12 months ending Sept. 30, 2009, Trony reported net income of $10.6 million on revenues of $96.9 million. Bankers plan to price 10.2 million ADS at $13 to $15 each Wednesday evening to trade Thursday morning. (Note: The company will offer 15 million ADS and selling shareholders will offer 4.5 million ADS.)
There you have it. Each company is profitable and with growing financial numbers, according to their respective prospectuses. And technology is an important feature in each company’s business model. Nevertheless, the skepticism about Chinese IPOs remains.
Still burned into people’s memory banks is the Shanda Games (NSADAQ: GAME) IPO. The Shanghai-based online game provider crashed on take-off. That wasn’t supposed to have happened. (For some investors, it was worse than getting a severe case of heartburn after a delicious five-star Chinese banquet.) 
To refresh the story: On Sept. 25, 2009, Shanda Games, then 100 percent owned by Shanda Interactive (NASDAQ: SNDA), priced 83.5 million ADS at $12.50 each. The buzz was that the deal was hot, hot, hot, and the investment pros were talking about an opening premium of $1 to $3 per share -– a 3-Star SCOOP rating.
Two days before its pricing, Shanda Games filed an amendment increasing the offering to 83.5 million ADS, up from 63 million ADS. Its parent, Shanda Interactive, had initially announced it was selling 50 million shares in the offering. Now it was increasing that amount to 70.5 million ADS.
The tape told the story – and it didn’t have a happy ending.
To everybody’s surprise, the IPO opened flat (unchanged at $12.50) and then tanked to closed at $10.70 per ADS -– down 14 percent on its first day. It closed on Friday, Dec. 4 at $9.31, DOWN 25.5 percent from its offering price.
But not every Chinese IPO has been a disappointment this year. For that matter, there have been a few big winners among all 55 of this year’s IPOs.
As of Friday’s close, the three top aftermarket performers of 2009 came from China:

1.) Lihua International (NASDAQ: LIWA) (China) closed at $10.90, UP 172.5 percent from $4, its initial offering price.
2.) Duoyuan Global Water (NYSE: DGW) (China) closed at $39.30, UP 145.6 percent from $16, its offering price.
3.) (NASDAQ: CYOU) (China) closed at $31.80, UP 98.8 percent from $16 its offering price.


But the year did not get off to a fast start. It opened on Feb. 10 when, Mead Johnson Nutrition (NYSE: MJN) priced 30 million shares at $24 each. On Friday, Dec. 4, Mead Johnson Nutrition closed at $43.90, UP 82.9 percent from its offering price.
The next two IPOs were from China. On March 12, NIVS IntelliMedia Technology (AMEX: NIV), a maker of audio and video consumer products, priced 550,000 shares at $3.50 each. The stock closed on Friday at $2.27, DOWN 35.1 percent, making it 2009’s poorest aftermarket performer. Then along came, which priced its IPO on April 1, or April Fool’s Day in the United States. (As we’ve just discussed, though, Changyou’s IPO performance was anything but foolish.)
It looks like the 2009 IPO calendar is coming full circle — it started with Chinese deals and this week’s calendar has four from China.
Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and staff do not issue advice, recommendations and opinions.