22 April 2019
Alibaba's shares have marched steadily upward since their New York debut and are now 44 percent above their listing price, valuing the company at a staggering US$241 billion. Photo: AFP
Alibaba's shares have marched steadily upward since their New York debut and are now 44 percent above their listing price, valuing the company at a staggering US$241 billion. Photo: AFP

China tech IPOs soar but likely due for pullback

In the absence of big company news so far this week, I’ve decided to look at the scorecard of technology IPOs over the last 12 months and what it might say about what’s ahead for next year.

The record so far looks quite good in general, especially for companies that made a flurry of New York offerings at the end of last year and whose shares have mostly doubled since then.

One notable exception to the trend is mobile games, as two out of three major players are now squarely in negative territory. That doesn’t bode well for upcoming listings in New York and Hong Kong, which appear to be stalling due to the cool investor sentiment.

Let’s begin this IPO scorecard with a look at e-commerce juggernaut Alibaba (BABA.US), which became the biggest public offering of all time when it raised US$25 billion in its blockbuster listing last month. Unlike Facebook (FB.US), the previous record holder for the biggest tech IPO, Alibaba’s shares have marched steadily upward since their debut and are now 44 percent above their listing price, valuing the company at a staggering US$241 billion.

Alibaba’s success is at least partly the result of the huge hype the company is able to generate, which includes a nonstop series of major acquisitions and new initiatives into areas ranging from internet finance to Hollywood.

Better gauges of the Chinese e-commerce market come from (JD.US), Alibaba’s closest rival, whose shares are ahead by a smaller but still healthy 27 percent from their IPO price in May.

The less well-known Jumei International (JMEI.US), an online cosmetics seller, is probably even more reflective of the real e-commerce situation, with its shares essentially unchanged from their IPO level in May.

I would expect Alibaba and JD to command a premium over smaller stocks like Jumei, though I do believe these leaders are just a tad overvalued and are due for a relatively large correction.

Outside e-commerce, newly listed online travel agencies have also posted strong results, with both Qunar (QUNR.US) and Tuniu (TOUR.US) notching big gains since their recent IPOs.

Qunar was part of a flurry of deals that came at the end of last year, ending a prolonged period of negative sentiment for the group. It has been handsomely rewarded for taking that risk, and is up 84 percent since its debut, even though the company is still losing money.

Tuniu is up an even larger 119 percent, and is no doubt a favorite not only for its growth prospects but also its potential as an acquisition target.

I’ll close out this IPO winners review with a mention of some of the biggest gainers, which come from a wide range of sectors. They include online classified advertising firm (WUBA.US), whose shares are up 119 percent; online lottery ticket seller (WBAI.US), up 122 percent; and online car seller Autohome (ATHM.US), which is the biggest gainer with a hefty 188 percent growth.

All of those shares debuted late last year when positive sentiment was returning to the sector, though their huge gains could also mean they’re probably due for a pullback in 2015.

The mobile game sector is the lone laggard among the flurry of technology IPOs over the last 12 months.

Sungy Mobile (GOMO.US), listed late last year, is now down 32 percent from its offering price. Even worse is Hong Kong-listed Forgame (00484.HK), whose shares have lost more than 70 percent of their value from their listing price a year ago.

One bright spot in the mix is iDreamSky (DSKY.US), but even that company has given back most of its big gains since a New York IPO last month and is now just 8 percent ahead of its listing price.

Those weak performances reflect sluggish market sentiment for the group, that’s almost certainly the reason behind the delayed offerings for three other candidates.

Feiyu and Linekong applied for listing in Hong Kong last month, but we haven’t heard anything from them lately. Similarly, Chukong sought a New York listing earlier this year, but later called off the deal due to lack of interest.

All in all, I wouldn’t be surprised to see Feiyu or Linekong get yanked as well, and for both stocks to quickly become investor outcasts if and when they do make it to the market.

Bottom line: Chinese internet stocks that listed overseas in the last year are due for a pullback after strong run-ups, while new online gaming listings will remain investor outcasts.

– Contact us at [email protected]


A commentator on China company news and associate professor in the journalism department of Fudan University in Shanghai. Follow him on his blog at

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