Trader Talk

Chinese IPOs: Success begets success

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The IPO market has been quiet for the past few weeks, but it will be heating up soon. Just in the past couple weeks, I count 20 IPOs that have filed to go public. Depending on market conditions, most of those will likely try to go public in January 2014.

While there are no Chinese IPOs among them, there are many on the horizon. I asked Renaissance Capital what Chinese companies it felt would most likely be going public in early 2014. Here's four candidates:

  1. Alibaba: Internet e-commerce
  2. Business-to-consumer site. Sells a lot of different items from retail to airline tickets. The Ontario Teachers Pension is an investor
  3. VANCL: China's largest online clothing retailer
  4. I-Kang: China's leading privately held medical services provider; recently received investment from Goldman Sachs and the government of Singapore

What's up? I wrote about this several weeks ago, but it's worth emphasizing again what the drivers of interest are:

First, massive growth potential. We had the CEO of Autohome on a couple weeks ago--he said most of the people who visited his site were buying a car for the first time in their lives! Think about that! There's 1.6 billion people in China. There are hundreds of millions of people who have never owned a car. Or a watch. Or insurance.

Second, transparency issues have gone away. Remember all the worries about whether you could believe the numbers coming out of these Chinese companies? What happened to all those worries? As far as I can tell, nothing has changed. Nobody has made any moves to revamp the accounting procedures, or improve transparency. It's just that more than a year has passed since it was an issue and everyone has forgotten. Oh sure, there was a brief period of six or seven months earlier this year when Chinese IPOs evaporated here. But that started changing in the second half. China is "out of the penalty box," as one trader said.

Third, better backing from major investors. Well known names have money in many of this new crop; I mentioned Goldman Sachs as a major investor in I-Kang, the Ontario Teachers Pension is an investor in, Sequoia is an investor in, Warburg Pincus in That means investors have a higher comfort level.

Fourth, deals doing well spur other deals. It helps that and Sungy Mobile have done so well since going public less than a month ago; just look at the returns on recent IPOs.

Chinese IPOs this year:

  • 168%
  • Authome: 105%
  • Sungy Mobile: 77%
  • Qunar: 76%
  • 129%

By the way, 2013 has been a big year for IPOs in general. IPOScoop tells me that 218 companies went public in 2013 (this excludes ADS), well above the 132 that went public in 2012, the 123 that went public in 2011, and the 153 that went public in 2010.

By CNBC's Bob Pisani