Submitted by Abby Joseph at
as part of our
The Chinese are coming! Well, not really, but we did see the
first Chinese initial public offering (
) of the year list on an U.S. exchange yesterday and only the third
Chinese IPO since 2011. The pipeline has dried up from the 60 or so
Chinese IPOs listing in the U.S. from 2008 to 2011. And whether the
flow will start again is questionable, as I doubt it will
China-based shopping center LightInTheBox Holding Co., Ltd.
(NASDAQ/LITB), an online seller of apparel and other household
goods to the world market, is the top Chinese online retailer as
far as sales to customers outside of its country's borders. The
company, sometimes seen as the little "Amazon.com" of China, was
started by Alan Guo, who was previously an executive at Google
China. The company priced 8.3 million shares at $9.50 (the
mid-point). The deal was hot due to the absence of IPOs coming from
China. The stock surged 34% to an intraday high of $12.69 prior to
settling at $11.61 for a market cap of about $470 million.
The strong buying in LightInTheBox indicates the demand for
Chinese IPOs that are deemed to be trustworthy. The other two
Chinese IPOs that debuted in 2012 have done well-online discount
retailer Vipshop Holdings Limited (NYSE/VIPS) and social media
company YY Inc. (NASDAQ/YY) are up a whopping 340% and 150%,
respectively, from their IPO debuts.
At issue have been the numerous cases of fraudulent financial
reporting by Chinese companies listing in the U.S., since these
companies were not subject to U.S. reporting requirements with many
listing on the bulletin board and pink sheets.
The Securities Exchange Commission (SEC) finally had enough and
decided to demand more detailed and audited reporting by Chinese
companies seeking to list in the U.S.
We all know what happened after; whether the flow of Chinese
IPOs will begin again for the U.S. capital markets is doubtful at
this time, as there's tons of money available in Asia. (Read
"Chinese Economy Finally Slowing; What It Means for Its
Goldman Sachs suggests the major market for Chinese IPOs will be
at home in China, where there could be as many as 349 IPOs this
year. (Source: "China: A-share Portfolio Strategy, IPO deep dive:
The Sword of Damocles or Paper Tiger?," China First Capital web
site, January 23, 2013, last accessed June 10, 2013.)
Of course, the U.S. capital markets are favored by Chinese
companies that want more exposure and possible access to the U.S.
and other global markets for their products.
Yet based on what the SEC has said, any Chinese company looking
at listing here will be subjected to stringent reporting
requirements, including all of the approved U.S. "Big Four"
auditors. I'm all for the move, as it will give me more confidence
Based on what happened to LightInTheBox, the demand for Chinese
IPOs appears to be hot. The problem will be to convince the Chinese
to adhere to U.S. demands.
With over 1.3 billion people and a massive middle class, you
know there are many Chinese companies that would find a nice home