Opinion | Simcere to de-list, Vipshop adds shares
A new de-listing bid by Simcere Pharmaceutical and rumoured similar plan by The9 show that overseas investors remain indifferent toward all but a few high-growth Chinese firms
A week after shares of Internet portal Sohu (Nasdaq: SOHU) went on a roller coaster ride on rumours of a de-listing plan that the company later denied, we're getting word that drug maker Simcere Pharmaceutical (NYSE: SCR) is launching the latest privatisation plan by a US-listed Chinese firm. In related news, media are also reporting that online game operator The9 (Nasdaq: NCTY) is also considering such a plan. But red-hot e-commerce firm Vipshop (NYSE: VIPS) is moving in the opposite direction, announcing a plan to sell more shares to raise up to US$180 million. These very different tales show that overseas investors have become quite choosy toward Chinese companies in the current climate, richly rewarding a few fast-growth players while largely ignoring most others.
Both of those deals may have run into trouble due to their massive size, as each company had a market capitalisation in the US$4-5 billion range at the time of their offers. By comparison, Simcere might have an easier time since its market cap is much smaller, at around US$500 million.
The story with Simcere is really quite disappointing, as the company offered a nice bet on China's fast-growing pharmaceutical industry. Simcere's shares traded as high as the US$16 range back in 2008, but are now at about half that level and show no signs of going anywhere as investors have become indifferent to the stock.
Other Chinese companies are facing similar indifference, as investors avoid their stocks due to their high volatility and also doubts about the quality of their bookkeeping due to a series of accounting scandals in 2011. Other companies to privatise over the last year include Hong Kong-listed Alibaba.com, and US-listed Grentech, while hotel operator 7 Days (NYSE: SVN) is also in the process of privatising.