Of the seven deals slated to price last week, three were postponed; the four companies that completed their deals were Chinese ADRs. Though a healthy pipeline shows promise for upcoming months, last week's events indicate investors remain wary and prompted a rocky start to the 2010 IPO market.
The following companies postponed their offerings: Terreno Realty (TRNO), a newly formed industrial REIT targeting six coastal US markets, shelved its deal after cutting its proposed size by 33%. Following the terms revision, the San Francisco-based REIT had planned to raise $200 million. FriendFinder Networks (FFN), an online adult social networking company, had planned to raise $220 million by offering 20 million shares at $10-$12; it rescheduled its offering for this week. Finally, Daqo New Energy (DQ), one of five Chinese ADRs scheduled to price last week, postponed its IPO after cutting its deal size by 22% to $68 million.
The remaining four Chinese companies, China Hydroelectric (CHC), China Electric Motors (CELM), Andatee Marine China Fuel (AMCF) and Century 21 (CTC) completed their deals.
China Hydroelectric (CHC) is a small hydropower plant operator based in Beijing. It raised $96 million by offering 6 million units at $16 (each unit contains one ADS representing three ordinary shares and one warrant to purchase three ordinary shares for $15) after increasing its proposed deal size three times. The stock fell 6% in its debut and an additional 11% in the aftermarket.
China Electric Motor (CELM), which produces micro-motor products for household appliances, raised $24 million by offering 5 million ADSs at $4.50, the low end of its revised range ($4.50-$5). It had slashed its range twice prior to the offering, first expecting to price between $6-$7 and then between $5.50-$6.50. Its stock slipped 1% in its first day of trading but has improved slightly since. In another small deal, Andatee Marine China Fuel (AMCF), which produces and sells blended marine fuel oil for cargo and fishing vessels in China, raised $20 million by offering 3 million ADSs at $6.30. The stock fell over 8% in its debut but made a moderate recovery and is currently off 1%.
Finally, IFM Investments (CTC), which exclusively franchises the Century 21 brand in China, raised $87 million by offering 12.5 million ADSs at $7. The company had originally planned to offer 16.7 million ADSs, including 4.2 million ADSs from selling shareholders, at a price between $8.75 and $10.75, but it lowered the price range and removed the secondary selling in a Wednesday SEC amendment. Its stock gained almost 5% in its debut but fell 4% in aftermarket trading.
Recent postponements, price cuts and lackluster returns demonstrate investors may be cautious given lingering volatility in the markets and fundamental regulatory changes both in China and the U.S. However, we expect growth to return in upcoming months as the overall environment stabilizes, especially given the robustness of the IPO pipeline: a total of fourteen companies submitted initial filings with the SEC during the month of January and sixteen companies announced terms.
