Chinese IPOs Top NASDAQ's Foreign Market
NASDAQ is gaga for GAGA, and a growing number of other Chinese companies going public on the U.S. market site.
“We hope this one is as hot if not hotter than Lady Gaga," said Bob McCooey, sr. VP of new listings at NASDAQ OMX Group.
Chinese vegetable producer Le Gaga is making its U.S. debut under the ticker symbol GAGA, pricing at the top end of its range at $9.50 per share.
“There is a growing middle class with a lot more disposable dollars who are willing to pay a premium price for fruits and vegetables and that’s what Le Gaga is focused on,” he said.
China recently surpassed Israel as NASDAQ’s No. 1 foreign market, with 156 Chinese company listings. Chinese firms like Le Gaga are drawn to U.S. markets because they are looking to raise capital more than once, said McCooey. In the local Asian markets, for instance, firms have just one opportunity to raise money, he said.
“I know of companies that have built new plants, built new distribution centers, hired new workers because of their ability to access the capital here through our market,” he said.
Another Chinese firm, Mecox Lane soared in its debut on the NASDAQ earlier this week. Based in Shanghai, Mecox Lane sells women's apparel on its M18.com website, targeting young urban female shoppers with rising discretionary incomes. The typical customer spends $10-60 per piece, the company's chairman told CNBC earlier this week.
The influx of Chinese IPOs comes amid growing concerns that the world's second-largest economy is slowing down, yet Shen remains optimistic.
"The bright spot is on the consumer side," said Shen. "I don't know how the economy's growth rate will be in the next years, but this sector weathered the difficult times in 2008 and 2009."
China-based firms have posted some of the best and worst IPO returns this year. HiSoft Technology International Ltd , a information technology outsourcing company posted a nearly 170 percent return since its debut on the NASDAQ in June. Meanwhile, shares of China Ming Yang Wind Power Group , the largest non-state controlled wind turbine manufacturer, are trading 27 percent below their IPO price since going public on the NYSE in February.
NASDAQ's McCooey cautioned that due diligence for Chinese IPOs is the same “if not more intensive” than domestic IPOs. NASDAQ talks with companies at times three to four years before they IPO, he went on to say.
“The same underwriters leading a US IPO are leading an IPO from China,” he said. “The Big Four [accounting firms] are doing all the audits of these firms. The big law firms that we’re well aware of in the U.S. that are doing IPOs are the same law firms that are doing IPOs from China.”
"When it comes to investors thinking about China, they should think of the successful companies that we have in the U.S. markets, those that they're familiar with," he said. "From picking up their Starbucks coffee first thing in the morning or their RIM device, all the way to DIRECTV, Costco and Whole Foods- at the end of the day, those kind of companies- there's an equivalent in China."