Chinese Web Firms Postpone U.S. IPOs, Cite Weak Market

21 Jul, 2011

Two Chinese Internet firms have postponed their U.S. fundraising plans as investor appetite for risk waned after a series of accounting scandals tarnished the reputation of overseas listed Chinese stocks.

Chinese online video firm Xunlei said on Thursday it had decided to postpone its initial public offering on the Nasdaq, which had been set raise up to $114 million, due to stock market conditions.

Chinese e-book firm Shanda Literature will also postpone its fundraising plans due to poor market conditions, IFR, a Thomson Reuters publication, reported.

Investors have less risk appetite now compared to the past, it also has to do with valuations. If you look at the first quarter a lot of the new Chinese Internet IPOs had very high valuations," said Elinor Leung, a Hong Kong-based CLSA analyst.

Now the market is slightly better but (investors) may not be willing to pay for those valuations," Leung said.

Shanda Literature is a unit of Shanda Interactive and provides online literature and e-readers in China. The firm was hoping to raise around $200 million in its New York listing.

Chinese companies listed in the United States have seen their shares hit recently by concerns over accounting fraud at some firms. The problems at these firms were brought to light in part by research reports from short sellers such as Muddy Waters.

U.S.-listed Chinese tech heavyweight Baidu Inc and Sina saw their shares plunge in the early part of June after Muddy Waters released a report on Sino-Forest alleging Sino-Forest was involved in accounting fraud. Sino-Forest has denied any wrongdoing.

Baidu and Sina shares have now returned to pre-scandal levels. Neither company has been associated with any accounting issues.

(By Melanie Lee, additional reporting by Shu-Chen Yang in HONG KONG and Sharma Himank in BANGALORE; Editing by Jacqueline Wong and Lincoln Feast)