IPO a No Go for Chinese firms
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Global Times, July 22, 2011
Two Chinese companies have postponed their plans for initial public offerings (IPO) in the US led by poor market conditions as investors are losing confidence in US-listed Chinese companies due to a series of accounting scandals in recent months.
Xunlei Limited, a Shenzhen-based software and file-sharing website backed by Google Inc, announced Wednesday it will again postpone its IPO on the NASDAQ. It didn't say how long the stall would last.
"The market environment for US listings is really poor now, and our true value cannot be reflected by going public at the moment," said Wang Shanna, deputy president of Xunlei.
Xunlei, with more than 260 million users, made profits in 2009, Wang said.
"We will wait and see the best time to restart the IPO," Wang remarked.
Online literature firm Cloudary Corp also postponed its IPO on the New York Stock Exchange due to unfavorable market conditions, Thomson Reuters publication IFR reported Wednesday.
Since early June, US-listed Chinese companies were involved in accounting scandals and the US Securities and Exchange Commission is examining Chinese companies engaged in "reverse mergers (backdoor listings)."
Global rating agencies Moody's and Fitch raised warnings in recent weeks about Chinese companies in terms of corporate governance and accounting risks.
Stock prices of many US-listed Chinese companies slumped and several companies had to postpone or cancel their fundraising plans.
"Recently, there is no hope for Chinese Internet companies to go listing in the US," Zhang Ying, a founding partner of venture capital company, Matrix Partners China, said on his microblog Wednesday.
"US investors are quite cautious now, so it's not an ideal time for companies to go public, especially for companies without highlighted strengths," said Li Weidong, research director with China Venture.
Seven Hong Kong and Taiwan music companies are suing Xunlei over music copyright infringement in Shenzhen, asking compensation of 20.5 million yuan ($3.2 million).
"Copyright protection is a potential risk for investors and if Xunlei loses the lawsuit, it needs to compensate those companies," Li Weidong said.
"Our legal department is making active efforts to solve copyright problems," said Wang with Xunlei.
For companies planning to list IPO in the US, besides transparent corporate governance, performance is also important, China Ventures's Li said.
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