Hurray! may find sentiment hard to crack on Nasdaq
Internet firm seeks US$91m while rivals are still reeling from declines last year
Mainland internet media companies are past darlings of the Nasdaq Stock Market but prospective newcomers such as Hurray! Holding, which filed its listing papers on Wednesday, are more likely to find investor sentiment much tougher than their predecessors.
Hurray!, which focuses on advanced second-generation services, is seeking up to US$91.8 million from an initial public offering at a time when the stock prices of several Nasdaq-listed rivals are struggling to recover from last year's declines.
Shares of Tom Online, Linktone, KongZhong, Sohu.com and Sina Corp plunged to 52-week lows in August last year on reports of a crackdown on short messaging services and internet and wireless content deemed illicit by Beijing authorities.
Beijing began a clampdown on billing abuses in late 2003, targeting value-added service providers that signed up customers for services without permission, overcharging and spamming customers who then had to pay for the messages.
In August, state-owned China Mobile suspended services of several service providers, including Sohu.com and Mtone Wireless, which called off its planned US$55 million Nasdaq listing.
Hurray! has also been affected. According to its listing prospectus, China Mobile and China Unicom imposed charges of 1.4 million yuan on the company to September last year.
The company said billing systems in place after the crackdown were at least partly responsible for a 13 per cent decline in short messaging service revenue in the second and third quarters of last year.
Analysts said yesterday fears of further interference by the mainland government could dampen enthusiasm for future listings in the internet and mobile value-added services sector.
'Even big players KongZhong and Linktone are still trading below their listed price, so I can't see people showing that much interest [in new listings],' one analyst said.
However, DBS Vickers analyst Wallace Cheung said 'policy issues' such as the government crackdown should have less influence on potential investors than whether the company offered value for money.
'The market [for value-added services] is still growing, so there should still be plenty of interest,' he said.
Hurray! recorded net income of US$4.5 million from revenue of US$23.1 million in 2003. This rose to net profits of US$12 million from US$39.4 million in turnover for the nine months to September last year. The company said revenue had grown 157.8 per cent for the nine months year on year.
The company will sell up to 6.88 million American depository shares for between US$9.60 and US$11.60 each. Based on the mid-point of US$10.60 per share, Hurray! would have an initial market capitalisation of US$232 million, about 52 times 2003 earnings of US$4.5 million.