China portals eye Nasdaq market
Mainland internet portals are rushing to tap the US market after the successful Nasdaq debut of recruitment portal operator 51job.
Chinese tourist portal eLong has filed a preliminary prospectus with the Securities and Exchange Commission for a Nasdaq listing to raise between US$50.4 million and $59.1 million, with Deutsche Bank handling the deal. It is offering 3.62 million American depository receipts (ADRs) while its existing shareholders will sell 761,921 ADRs at $11.50 to $13.50 each.
China Finance Online, the mainland version of Bloomberg, also hopes to ride on investors' growing interest in China internet plays by selling 6.2 million ADRs at US$10 to $12 each to raise between $62 million and $74.4 million.
51job enjoyed a strong debut last month with a gain of 51.07 per cent to US$21.15 after it fixed the issue price at $1 higher than its offer range, or at $14, due to hot demand.
China Finance has also jumped on the Nasdaq bandwagon. After a global roadshow that began on Wednesday, its offering will be priced on Thursday in the US with the stock trading the following day.
Led by JP Morgan, the offering has been well-received among investors, with one source saying the book was covered in a few hours of the offer being launched. But some fund managers were not so optimistic, insisting China Finance could not be compared with 51job.
'51job has steady income streams from its advertising business while China Finance's subscription income and new subscribers look shaky,' said one.
China Finance posted a net profit of US$1.46 million on a total revenue of $2.28 million for the first six months this year. Last year, it recorded a net profit of $1.19 million on revenue of $2.35 billion.
But the fund manager estimated a churn rate of between 20 and 30 per cent for China Finance based on the subscriber information provided in the listing prospectus.
'This is a substantial number and raises my concerns of the sustainability of its business,' he said. 'Also, the company is not going to pay dividend in the near term after the listing, but it paid a chunk of US$3.5 million dividend to preference shareholders [including IDG Technology Venture Investment, Vertex Technology Fund, Tongma Network and Capital Ventures International] last year.'
According to a report by JP Morgan, China Finance has no plans to pay out any cash dividends in the foreseeable future as it prefers to retain future earnings for operational use and expansion.