Dominos Falling: Chinese Dotcoms Pare Back IPO Listing Plans

In a curious example of the economic impacts of the Japanese crisis, Chinese technology companies, the most numerous, successful and aggressive pursuers of public funds, are cutting back on their listing plans, fearing that prices will be less than optimal due to investor caution in the wake of the Japanese situation. The implication is that capital allocated to this sector will become scarce as funds seek alternative outlets.

Kathrin Hille reports in the Financial Times:

"Chinese internet companies are among the first to take a more cautious approach to their listing plans as markets are shaken by the crisis in Japan.

Global Market Group, a Chinese e-commerce company, has postponed an initial public offering that it had planned to price on Thursday. “After three straight days of significant falls in the market, this is not the right time,” said a person familiar with the situation. “We need to watch the market over the next few days.”

The company, which operates an online marketplace on which Chinese exporters can find international buyers, had planned to raise $131m from a New York Stock Exchange listing that it was going to price on Thursday in a range of $11 of $13 per share.

Deutsche Bank, the lead underwriter of the planned deal, declined to comment.

Qihoo 360 Technology, China’s leading provider of free antivirus software, scaled back the estimated size of its planned US IPO. In a filing with the US Securities and Exchange Commission late Wednesday, it said it expected to raise $174m, down from the $200m given in earlier documents.

Qihoo started marketing the offering in Hong Kong on Thursday and the deal is expected to price on March 25 or March 28. UBS and Citigroup are the joint bookrunners.

The company makes money through online advertising and internet games distributed to the users of its free antivirus software. According to its prospectus, it has 300m monthly active users, making it one of the largest internet businesses by user base in China.

Any bad news from the Qihoo listing, or a long delay in GMC’s IPO, would throw off track plans by half a dozen other Chinese internet companies to go public in the US in the coming months. These include Renren and Kaixin, China’s two leading social networking services, which hope to raise more than $300m each.

Until now, Chinese internet companies have been well received by international investors. Youku, the online video company, and Dangdang, the e-commerce company, jumped 146 per cent and 77 per cent respectively on their each of their first days of trading in December. Both are still trading much higher than their listing prices.

Industry executives and bankers said they were confident of a market rebound. “Right now everyone is sitting there and watching events in Japan,” said one source involved in a planned IPO.

“If people take their eyes off the TV screens and turn them back to the computer screens, they could become interested in some good value deals.”