News portal's debut impresses
A double suspension and a stock price that surged up to 78 per cent greeted the debut of People.cn, the online news portal of the Chinese Communist Party's mouthpiece, on its first day of share trading in Shanghai.
In a volatile day, the stock surged to as much as 35.60 yuan (HK$43.74), before closing at 34.72 yuan, up 73.6 per cent from the offer price of 20 yuan. The benchmark Shanghai composite Index edged down 0.35 per cent.
The company raised 1.38 billion yuan from an initial public offer of 69.1 million shares - or 20 per cent of the available shares - it said in an exchange filing this month. It was almost three times the amount initially sought.
At 20 yuan, the shares had a price-earnings ratio of 46.1. Yesterday's surge lifts that ratio to 73.5 times.
'Many investors do not really know the operations of People.cn. They are simply lured by the big brand name of People's Daily,' said Li Daxiao, a director at Shenzhen-based Yingda Securities.
Li said investors should hold off from buying People.cn - which is now valued at 9.7 billion yuan - till the price 'cools down'.
'The valuation is so high that it's unwise to invest,' Li said.
The Shanghai Stock Exchange called the first halt at 10am, 30 minutes after trading began, after demand pushed the shares up 55 per cent. Trading resumed at 10.30am, only to be suspended seven minutes later. The halt was lifted at 2.55pm, five minutes before the close of trade.
Hong Bo, a Beijing-based IT commentator, said the website of the People's Daily was different from those of internet companies like Sohu.com and Sina.com. 'What People.cn plays is another game,' he said. 'The investors are not seeing the investment from the angle of an enterprise's value, but from a political perspective.'
Hong said it was difficult to see the future, but the first-day performance was not surprising. 'This is the first company that has been floated among the array of state-owned websites in waiting,' Hong said. 'The government will make sure it is a success.'
Guotai Junan Securities said in a research note that the rational price for People.cn was 19.80 yuan to 23.10 yuan. Everbright Securities set the price at 19.50 yuan to 22.80 yuan.
People.cn's main shareholders include the mainland's three telecommunications carriers and Sinopec, according to its prospectus. The stake of People's Daily and its subsidiaries in the listed firm has dropped to 58 per cent from 80 per cent before the offering.
At an equivalent value of US$1.5 billion, People.cn is worth more than The New York Times, which has a market capitalisation of US$938 million. The Washington Post is valued at US$2.9 billion, while Gannett, which publishes USA Today, has a market cap of US$3.2 billion, according to data compiled by Bloomberg.